Gold News: Fed’s Hawkish Stance Pressures Prices as Holiday Trading Stalls

Gold Struggles for Direction as Holiday Lull Weighs on Trading

Gold prices dipped on Monday as thin holiday trading kept momentum in check. After last week’s sharp decline, gold is attempting to recover but faces resistance between $2607.25 and $2607.35. A breakout above $2629.13 is possible, but traders will need stronger volumes to drive further gains—something unlikely until after the New Year.

If gold can push through $2629.13, it may climb toward the 50-day moving average at $2668.75. On the flip side, a drop below $2607.35 could send prices back to $2583.91, with the next key support at $2536.85.

At 13:00 GMT, XAU/USD is trading $2615.47, down $8.140 or -0.31%.

Fed’s Hawkish Tone Keeps Gold Under Pressure

Gold’s price action remains restrained after the Federal Reserve’s 25 basis point rate cut on December 18. While the cut initially buoyed prices, the Fed’s forecast for just two rate cuts in 2025—down from the four projected in September—triggered selling, pulling gold to its lowest level since mid-November.

San Francisco Fed President Mary Daly highlighted strong consumer spending as justification for maintaining higher rates. For gold, higher interest rates continue to erode appeal, as bullion offers no yield and becomes less attractive compared to interest-bearing assets.

Quiet Holiday Markets Leave Gold Treading Water

With limited economic data this week and traders stepping back for the holidays, gold is expected to stay within a narrow range. Liquidity remains low, curbing volatility and keeping price movements subdued. However, UBS maintains a bullish outlook for gold, targeting $2800 per ounce by mid-2025.

Looking ahead, investors are watching potential political developments in 2024, including the U.S. presidential race. Analysts suggest market volatility tied to geopolitical uncertainty could provide fresh support for gold.

Treasury Yields and Dollar Stand Firm as Markets Pause

Treasury yields edged slightly higher to start the week, with the 10-year yield rising to 4.536% and the 2-year yield ticking up to 4.325%. Yields jumped last week following the Fed’s policy update but eased on Friday after softer-than-expected inflation data. The dollar held steady as markets processed the Fed’s outlook for 2025.

News of a narrowly averted U.S. government shutdown over the weekend calmed markets, but trading volumes are expected to thin further in the lead-up to the Christmas break.

Gold Outlook: Waiting for a Spark

Gold’s short-term outlook hinges on whether it can defend support at $2607.35. A slip below this level could accelerate losses to $2583.91 or even $2536.85. Conversely, a push above $2629.13 may open the door to $2668.75, but any meaningful rally will likely have to wait until after the holidays.

Longer-term, gold’s prospects remain positive, with rate cuts, inflation concerns, and geopolitical risks expected to drive demand through 2025. Traders should stay alert for shifts in economic data or political headlines that could reignite interest in gold as a safe-haven asset.

More Information in our Economic Calendar.