Chairman Jerome Powell’s comments after the meeting and updated economic projections will be critical. If the Fed signals only a modest number of rate cuts in 2025, gold’s appeal could face headwinds due to the higher opportunity cost of holding non-performing assets. Conversely, indications of a dovish stance, with multiple cuts forecast, could reignite bullish momentum.
Inflation and PCE data in focus
The Personal Consumption Expenditures (PCE) Price Index, the Fed’s preferred inflation gauge, will be released two days after the meeting and could validate or challenge the central bank’s projections. A soft PCE push would strengthen the case for further monetary easing and strengthen the gold sector. However, more persistent than expected inflation could prompt a cautious tone from Powell, potentially limiting rate cuts and dampening the short-term outlook for gold.
Central banks and geopolitics provide tailwinds
China’s renewed gold purchases in November have underlined strong demand from central banks, adding a long-term bullish factor. Meanwhile, geopolitical risks, including tensions in Gaza, continue to strengthen gold’s appeal as a safe haven. These factors provide crucial support even as gold traders face potential headwinds from a strong US dollar and higher government bond yields.
Market Forecast: Fed will dictate next steps
Next week’s Fed meeting will be crucial. A dovish tone with an emphasis on multiple rate cuts in 2025 could fuel gold’s upside potential, while a more cautious stance could limit gains. Over the long term, gold remains well positioned for sustained strength, supported by central bank demand and accommodative monetary policy. Traders should prepare for higher volatility as markets digest the Fed’s projections and key inflation data.
Technically, I will maintain a bullish stance if the price remains above $2,663.51, and shift bearish on confirmed trading activity below $2,631.04.
More information in our Economic Calendar.