Gold price (XAU/USD) is trading flat near $2,625 during the early Asian session on Monday.
Influence of the Federal Reserve
The Fed’s hawkish stance might be weighing on the gold price. In the December meeting, the Fed lowered interest rates as expected but signaled it would slow the pace of further borrowing cost cuts. The Fed’s dot plot projected a half-percentage point rate cut in 2025, compared to a full percentage cut projected in September. This has led to a lift in the US Dollar (USD), and since higher real interest rates increase the opportunity cost of gold, it undermines the USD-denominated gold.
Impact of US Inflation Data
On the other hand, softer-than-expected US inflation data could help limit the precious metal’s losses. The US inflation, measured by the Personal Consumption Expenditures (PCE) Price Index, rose to 2.4% YoY in November from 2.3% in October, which was below the market consensus of 2.5%. Meanwhile, the Core PCE jumped 2.8% in November, the same as the previous reading but below the 2.9% expected.
Role of China’s Gold Demand
The upturn in gold demand in China might contribute to the yellow metal’s upside. As China is the world’s largest gold consumer nation and with less than 6 weeks until Chinese New Year, which is the world’s heaviest gold-buying festival overtaking Diwali in India, it could boost gold’s prospects.
Geopolitical Tensions Effect
The ongoing geopolitical tensions in the Middle East could boost safe-haven flows, which would benefit the gold price by increasing its attractiveness as a safe-haven asset.
Related topics：
