Gold price forecast remains steady near $2,625 during early trading hours in the Asian session on Monday. Traders are closely watching for new catalysts, as mixed economic signals influence the yellow metal’s trajectory. The Federal Reserve’s (Fed) hawkish stance could add pressure to Gold prices, but a softer US Dollar, driven by weak inflation data, may limit significant declines.
Federal Reserve’s Impact on Gold Price forecast
The Federal Reserve’s recent decision to lower interest rates in December came as expected. However, the Fed indicated a slower pace for future rate reductions. The dot plot, which outlines the Fed’s interest rate projections, now shows a half-percentage point cut in 2025 instead of the full percentage previously projected. This shift supports the US Dollar (USD), creating a challenge for Gold prices as higher real interest rates increase the opportunity cost of holding non-yielding assets like Gold.
Softer Inflation Data Offers Relief
Recent US inflation data provided a glimmer of hope for Gold bulls. The Personal Consumption Expenditures (PCE) Price Index, a key measure of inflation, rose to 2.4% year-on-year (YoY) in November, slightly up from 2.3% in October but below market expectations of 2.5%. Similarly, the Core PCE held steady at 2.8%, aligning with the previous reading but falling short of the anticipated 2.9%. This softer-than-expected inflation data could cap losses for the precious metal.
China and Geopolitical Factors Driving Demand
China’s robust Gold demand also bolsters XAU/USD’s support. As the world’s largest Gold consumer, China’s buying activity intensifies ahead of the Chinese New Year, a period that surpasses India’s Diwali as the peak Gold-purchasing season. Meanwhile, ongoing geopolitical tensions in the Middle East continue to drive safe-haven investments, further benefiting Gold prices.
Gold traders are navigating a landscape shaped by shifting economic indicators and global events. The Federal Reserve’s cautious approach to rate cuts, coupled with mixed inflation data, creates a balanced environment for XAU/USD. Additionally, rising demand in China and geopolitical uncertainty provide a supportive backdrop for the yellow metal. For more updates on Gold trends, visit Daily Gold Signal. Explore the latest analyses and forecasts on our Daily Gold Update page.
