Spot gold prices saw a modest increase on Monday, fueled by a weaker US dollar and ongoing geopolitical concerns as markets braced for the Federal Reserve’s two-day policy meeting. Investors are anticipating a third rate cut from the Fed and are looking for guidance on the central bank’s outlook for 2025 and beyond. As of 01:41 p.m. ET (1841 GMT), spot gold was up by 0.2%, trading at $2,654.27 per ounce. Meanwhile, US gold futures settled 0.2% lower at $2,670 per ounce.
The softer US dollar, which retreated by 0.1% on the day, provided support for gold. The dollar index (.DXY) fell from a near three-week high reached on Friday, making dollar-priced gold more affordable for holders of other currencies. This retreat in the greenback was coupled with a continued stream of geopolitical uncertainties, which have underpinned gold’s appeal as a safe-haven asset.
Nitesh Shah, commodity strategist at WisdomTree, attributed gold’s recent strength to a combination of factors, particularly the ongoing geopolitical risks. “I think the continuous presence of geopolitical risks are contributing to gold’s strength,” Shah said, referencing Israel’s decision to double its population in the Golan Heights due to ongoing tensions with Syria. Despite moderate calls from rebel leaders in Syria following the ousting of President Bashar al-Assad, the political environment remains volatile, bolstering demand for precious metals as a store of value.
Additionally, Shah highlighted that China, the world’s largest gold consumer, has resumed its gold buying. “China is likely to ramp up policy stimulus to revive its economy, which would further support gold,” Shah noted. With global economic conditions under strain, such actions are expected to contribute to the ongoing bullish trend in the gold market.
Low Interest Rates and Fed Policy Continue to Support Gold’s Appeal
Gold, which is considered a safe investment during periods of economic and political instability, continues to benefit from a low-interest-rate environment. As a non-yielding asset, gold becomes more attractive when central banks, like the Fed, maintain low borrowing costs. The market is now looking to the Federal Reserve’s meeting on Tuesday for signs of additional monetary easing.
Rhona O’Connell, an analyst at StoneX, warned that while the economic and political backdrop remains supportive for gold, the Fed’s potential shift to a prolonged pause in rate cuts could cap further gains. “The economic and political background is generally supportive for gold – but the Fed may cap prices if it points to an extended pause in rate cuts after December,” O’Connell said.
Looking ahead, gold’s price trajectory will likely depend on upcoming economic data, including US GDP and inflation reports scheduled for later this week. As the Fed prepares to meet, gold’s future performance will also hinge on its decisions regarding interest rates and economic projections for 2025. Citi analysts have forecast strong demand for both gold and silver until US interest rates stabilize, predicting a peak for both metals in late 2025 to early 2026.
Meanwhile, other precious metals showed mixed movements. Spot silver held steady at $30.57 per ounce, while platinum rose by 1.1% to $934.70 per ounce. Palladium, however, saw a slight decline of 0.8%, closing at $944.37 per ounce.
Gold prices are showing resilience in the face of geopolitical instability and an easing US dollar. With ongoing global tensions, including unrest in the Middle East, and the resumption of gold purchases by China, gold remains an attractive option for investors seeking safety. As the Federal Reserve prepares for another rate cut and provides guidance on its future policy stance, the outlook for gold remains positive. However, the potential for an extended pause in rate cuts could limit further gains, making the upcoming economic data crucial for determining the metal’s trajectory into 2025.
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