Gold News: Inflation Data Sparks Caution on Fed Cuts – What’s Next for Gold Prices?

Can Gold Hold Its Ground as the Dollar Gains Strength?

Gold prices edged higher on Thursday despite a slight rebound in the U.S. dollar, curbing demand for the yellow metal. Light trading during the U.S. Thanksgiving holiday saw the dollar index rise to 106.30, recovering from a two-week low of 105.85 reached in the prior session. The move followed the dollar’s steepest four-month decline, driven by investor caution over U.S. economic data and Federal Reserve policy direction.

At 10:59 GMT, XAU/USD is trading $2647.27, up $11.18 or +0.42%.

Is Inflation Stalling the Fed’s Rate Cut Plans?

Fresh Core Personal Consumption Expenditures (PCE) data revealed that inflationary pressures remain stubborn, dampening expectations of aggressive Federal Reserve rate cuts in 2024. The CME Group’s FedWatch tool showed a 64.7% probability of a 25-basis-point rate cut in December, reflecting growing skepticism about the central bank’s dovish pivot.

Kelvin Wong, senior market analyst at OANDA, emphasized that the Fed remains focused on bringing inflation back to its 2% target, which could limit its flexibility in easing monetary policy. Additionally, potential tariff increases under a Trump administration could complicate the Fed’s ability to act decisively on rates, adding another layer of uncertainty for traders.

Is Gold’s Safe-Haven Status Enough to Offset Weak Demand?

While gold often serves as a safe-haven asset during periods of economic and geopolitical instability, the metal’s appeal faced challenges on Thursday. Trade tensions resurfaced as Mexican President Claudia Sheinbaum warned of economic retaliation against potential U.S. tariffs, highlighting risks that could support gold in the long term.

However, near-term demand remains subdued, as evidenced by a 0.10% decline in holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, which fell to 878.55 metric tons on Wednesday. Thin holiday trading volumes further dampened market momentum.

What Does the Future Hold for Gold Prices?

In the short term, gold may remain under pressure due to the strengthening dollar and cautious sentiment on Fed policy. Technical indicators suggest resistance near recent highs, while a lack of significant buying interest keeps prices vulnerable to further declines.

However, the longer-term outlook for gold remains positive, supported by macroeconomic uncertainties and potential shifts in U.S. trade and monetary policy in 2025. Traders should closely monitor inflation reports, Federal Reserve commentary, and geopolitical developments for further direction.

Gold prices are expected to test key psychological levels like $2500 or $2700 in the weeks ahead, with significant moves likely tied to how these factors unfold. For now, caution may dominate the market.

More Information in our Economic Calendar.