Gold News: Fed’s Hawkish Stance Pressures Prices as Holiday Trading Stalls

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At 13:00 GMT, XAU/USD is trading $2615.47, down $8.140 or -0.31%.

The Fed’s aggressive tone is keeping gold under pressure

Gold price action remains muted following the Federal Reserve’s 25 basis point rate cut on December 18. While the cut initially boosted prices, the Fed’s forecast for just two rate cuts in 2025 – fewer than the four forecast in September – led to selling, pushing gold into the background. the lowest level since mid-November.

San Francisco Fed President Mary Daly highlighted strong consumer spending as justification for maintaining higher interest rates. For gold, higher interest rates continue to undermine its appeal as precious metals do not yield returns and become less attractive compared to interest-bearing assets.

Quiet holiday markets make gold tread water

With economic data limited this week and traders taking a step back during the holidays, gold is expected to remain within a narrow range. Liquidity remains low, limiting volatility and keeping price movements moderate. However, UBS maintains a bullish outlook on gold, with a price target of $2,800 per ounce by mid-2025.

Looking ahead, investors are looking at possible political developments in 2024, including the US presidential race. Analysts suggest that market volatility, coupled with geopolitical uncertainty, could provide new support for gold.

Treasury yields and the dollar remain steady as markets pause

Government bond yields edged higher at the start of the week, with the 10-year yield rising to 4.536% and the 2-year yield rising to 4.325%. Yields rose last week after the Fed’s policy update, but fell on Friday after inflation data came in softer than expected. The dollar held steady as markets digested the Fed’s 2025 outlook.

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