Weekly Gold Update: Fed Rate Moves Weigh on XAU/USD

• Gold weekly forecast $2,604
• The technical analysis indicates that Gold is approaching overbought levels
• The upcoming PMI data next week could offer significant insights into the US economic outlook

Gold Weekly Forecast: XAU/USD Edges Lower Amid Fed Rate Changes

As of December 20, 2024, gold prices are hovering around $2,604 per ounce, reflecting a modest daily uptick of 0.4%. This week, however, the metal recorded a decline of approximately 1.6%, driven by evolving monetary policies and economic indicators.

Fed Rate Cut Pressures Gold Prices

The Federal Reserve recently announced a 25-basis-point rate cut, reducing the benchmark range to 4.25%–4.5%. While the decision was in line with expectations, the Fed’s cautious tone on future rate reductions weighed on gold’s performance. Higher interest rates typically reduce the appeal of gold, as they increase the cost of holding non-yielding assets.

Economic data released this week also played a significant role in shaping market sentiment. Stronger-than-anticipated GDP growth and lower unemployment claims in the U.S. bolstered confidence in the economy, influencing the Federal Reserve’s outlook and dampening gold’s momentum.

Source: goldprice.org

Global and Domestic Gold Market Trends

In India, gold prices saw a downward trend in tandem with global movements. The rate for 24-carat gold dropped to approximately $931.24 per 10 grams, reflecting a decrease of $8.55. Similarly, 22-carat gold was priced at around $853.49 per 10 grams, marking a decline of $7.83.

Meanwhile, demand in key Asian markets has been subdued due to fluctuating prices and reduced purchasing power. Central banks, such as the People’s Bank of China, are expected to announce additional monetary easing measures, including potential reductions in the Reserve Requirement Ratio (RRR), which could indirectly support gold prices in the long term.

Key Data to Watch Next Week

Investors are now focusing on the upcoming U.S. Personal Consumption Expenditure (PCE) report, a critical inflation gauge. The data is expected to offer more clarity on the Federal Reserve’s future policy direction, which could significantly impact gold prices.

Outlook for Gold Prices

Although gold has faced headwinds this week, the metal remains a vital hedge against inflation and geopolitical risks. With global central banks taking diverging approaches to monetary policy, market dynamics are likely to remain volatile, making gold an asset of interest for risk-averse investors.

As always, staying informed about central bank actions, economic releases, and market trends will be crucial for traders and investors navigating the gold market.