The U.S. dollar, buoyed by expectations of a slower pace of rate cuts through 2025, hovered around a two-week high, dampening gold’s appeal. The dollar index climbed 0.1% to 107.11, marking its best weekly performance in a month. At the same time, 10-year government bond yields rose to 4.344%, putting additional pressure on unyielding gold.
Macroeconomic data reinforced the Fed’s cautious outlook, with wholesale prices rising 0.4% in November, while jobless claims pointed to a weakening labor market. Core inflation remained high at 3.3% annualized, further reinforcing expectations for a rate cut in December but suggesting a cautious path through 2025.
Fed policy in focus at Traders Eye December meeting
The Federal Reserve is widely expected to cut rates by 25 basis points at its December 17-18 meeting, a move already priced into markets. However, Fed Chair Jerome Powell’s comments will be key, with traders looking for signals on the pace of cuts in 2025. The CME FedWatch Tool data reflects a 97% probability of a cut in December, but anticipate a gradual relaxation in 2025.
Analysts suggest macroeconomic headwinds, including strong U.S. economic data and above-target inflation, could limit a significant gold rally early next year. MKS PAMP SA’s Nicky Shiels expects a softer US dollar and lower real rates in the second half of 2025, supporting the bullish long-term outlook for gold.
Market forecast
In the near term, gold prices face bearish risks if they fall below $2,663.51, possibly heading towards $2,629.13. Conversely, a break above $2,693.40 could reignite bullish momentum, targeting $2,726.30.