The dollar index (.DXY) fell 0.1% after hitting a two-week high on Friday, making gold more affordable for holders of other currencies. Non-yielding assets such as gold typically benefit from a lower interest rate environment or during periods of economic uncertainty.
UBS analyst Giovanni Staunovo noted: “Market participants are awaiting the FOMC meeting and any guidance on future rate cuts.” He added that UBS expects a 25 basis point cut this week, with further cuts into next year, which could push gold prices towards $2,900/oz by mid-2025.
Focus shifts to Fed guidelines
The Federal Reserve’s two-day meeting begins Tuesday, with markets estimating a 97% probability of a 25 basis point rate cut, according to the CME FedWatch Tool. Investors are closely watching Chairman Jerome Powell’s comments for signals about the trajectory of interest rates through 2025. Lower interest rates could boost demand for gold as an alternative investment, especially as Treasury yields fell slightly on Monday.
Economic and geopolitical factors contribute to Bullion’s appeal
In addition to the Fed meeting, geopolitical uncertainty and upcoming economic data releases – including GDP figures, the PCE inflation index and consumer confidence – could impact gold prices this week. Citi analysts predict strong demand for gold and silver until US yields stabilize around neutral levels, likely in late 2025 or early 2026.
Market Forecast: Bullish Outlook for Gold
The near-term outlook for gold appears bullish, underpinned by expectations of a dovish Fed and continued economic risks. While resistance at $2693.40 could cap gains initially, a dovish policy statement or weaker-than-expected US data could pave the way for a breakout above this range, with potential upside targets near $2700. Traders should keep a close eye on Fed guidance and macroeconomic indicators this week.