Gold Prices Inch Up Ahead of Fed Meeting

December 16, 2024 TruthUSA

The central banks of England and Japan are also set to announce their interest rate policies this week.

The price of gold inched upward on Monday, ahead of the U.S. Federal Reserve officials’ meeting set for Tuesday, which is expected to announce a potential reduction in interest rates.

Gold spot price was at around $2,662 per ounce as of 9:00 a.m. EST, up more than 0.41 percent for the day. The policy meeting of the Federal Open Market Committee (FOMC) is set to take place on Dec. 17–18. Gold tends to move up in a low-interest-rate environment. According to data from the CME FedWatch tool, the majority of interest rate traders expect the central bank to announce a 25 basis-point cut from the current rate range of 4.5 to 4.75 percent.

However, recent data showed inflation had ticked up for the second straight month in November, creating uncertainty over whether the Fed would institute the cuts.

After the last meeting, on Nov. 7, the FOMC said that while inflation had progressed toward the Fed’s target rate of 2 percent, it still “remains somewhat elevated.”

The 12-month inflation rate of the consumer price index had risen to 2.7 percent in November from 2.6 percent a month back, after hitting a low of 2.4 percent in September.

In addition to the U.S. Federal Reserve, the central banks of Japan and England are also scheduled to announce their interest rate decisions this week, which could further influence gold prices in the near term.

Meanwhile, oil prices are moving down. Brent crude oil futures were trading in the red on Monday. In a Dec. 16 post, ING Bank pointed out that “concerns over waning demand in China have largely overshadowed the threats of tighter U.S. and European sanctions on the Russian oil supply.”

“The latest industrial output data from China shows that refiners reduced activity in November. Crude processed in the month fell to the lowest in five months at around 14.3m b/d as some processors shut plants for seasonal maintenance,” it said.

Gold 2025 Forecast

A recent World Gold Council (WGC) report said the yellow metal is “poised for its best annual performance in more than a decade” this year, with the bullion already up 28 percent through November.

In 2025, economic actions of the United States, including decisions taken by incoming President Donald Trump, are expected to shape the trajectory of gold prices.

Market consensus is forecasting that the Fed will bring down rates by 100 basis points by next year’s end. Inflation is expected to ease down while continuing to remain above the target. In Europe, central banks are also projected to cut rates, the report said.

“The U.S. dollar is expected to remain flat or slightly weaken as conditions normalize, while global growth remains positive but continues to grow below trend. In this context, the actions of the Fed and the direction of the U.S. dollar will continue to be important drivers for gold,” the WGC report said.

WGC pointed out that market consensus is suggesting a range-bound performance for gold this coming year.

However, if economic growth were to decline and interest rates move up, prices could be negatively affected, it said.

“Conversely, significantly lower interest rates or a deterioration in geopolitics or market conditions will improve gold’s performance,” it said.

For 2025, Geneva-based IG Bank predicts gold prices to “trade around the $3,000.00 mark for several months as it represents a major psychological resistance levels as a round number for many investors.”

Until this price limit is reached, global central banks will likely continue purchasing physical gold, it said. If the price breaks through $3,000 per ounce and purchases keep continuing, the next target would be $3,113.

In an October report, Goldman Sachs forecast gold prices to move up to $3,000 per ounce by the end of next year, pointing out that emerging market central banks have “ramped up purchases.”

Developed nations such as the United States, Germany, France, and Italy have a large share of their reserves in gold, at around 70 percent. In contrast, emerging markets tend to have smaller shares. For instance, only around 5 percent of China’s reserve is in gold.

“Seen that way, some central banks in emerging markets are catching up to their counterparts in developed countries,” the report said.

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