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Gold Price Hovers Near One-Week Low as Traders Await FOMC Decision

Gold Price Hovers Near One-Week Low as Traders

Gold Price Hovers Near One-Week Low as Traders Await FOMC Decision

Gold price (XAU/USD) remains under pressure, trading near a one-week low as the European session unfolds on Monday. The metal’s sluggish performance is weighed down by expectations that the Federal Reserve (Fed) will slow its rate-cutting pace amid stalled progress in reducing inflation toward the 2% target. Despite this, several factors are offering support to gold and limiting further downside.

A slight decline in US Treasury bond yields has weakened the US Dollar (USD), providing some relief to gold, which offers no yield. Additionally, geopolitical tensions and concerns over US President-elect Donald Trump’s policies are bolstering safe-haven demand for the metal. However, traders appear cautious and are avoiding aggressive directional bets ahead of Wednesday’s FOMC meeting, which could provide clarity on the Fed’s future rate-cut trajectory and influence gold’s price action.

Geopolitical Risks and Safe-Haven Demand Offer Support

  • Israel’s plans to expand its presence in the occupied Golan Heights have escalated regional tensions.
  • Israeli strikes in Gaza reportedly killed at least 53 Palestinians, while the Israeli military claimed to have neutralized militants in northern Gaza.
  • NATO Secretary General Mark Rutte warned of Russian President Vladimir Putin’s ambitions to target other parts of Europe after Ukraine.
  • Israeli airstrikes targeted missile launchers and radar systems in Syria, further intensifying geopolitical instability.

These developments are fueling safe-haven demand, offering some support to gold prices.

Fed Expectations and US Data Limit Upside Potential

Market sentiment remains anchored by the Fed’s anticipated decision to reduce interest rates by 25 basis points, with CME Group’s FedWatch Tool reflecting over a 93% likelihood of this outcome. Recent US inflation data, including the Consumer Price Index (CPI) and Producer Price Index (PPI), reinforced expectations that the Fed might adopt a more measured approach to rate cuts moving forward.

However, the yield on the benchmark 10-year US Treasury note hit a three-week high last Friday, signaling expectations for a less dovish Fed stance. This rise in yields is capping potential gains for gold.

Technical Outlook: Key Levels to Watch

  • Support: The $2,644-$2,643 range marks a key congestion zone. A sustained break below this area could open the door for further declines toward $2,625, followed by the monthly low at $2,614. A breach of the $2,605-$2,600 pivotal support could trigger deeper bearish momentum.
  • Resistance: Immediate resistance lies in the $2,665-$2,666 region, followed by $2,677. A move above $2,677 could set the stage for a retest of the $2,700 psychological level. Beyond this, gold may target the monthly swing high near $2,726, with a decisive breakout paving the way for further upside.

Market Focus

In addition to geopolitical risks, traders will monitor Monday’s global flash PMIs for insights into broader market sentiment. However, the primary focus remains Wednesday’s FOMC decision, Fed Chair Jerome Powell’s remarks, and the accompanying policy statement, all of which are likely to shape gold’s near-term trajectory.