Investors scrutinize the Fed and international tensions
The gold price (XAU/USD) remains near a recently reached low, reflecting market hesitation ahead of a crucial decision by the US Federal Reserve (Fed). While expectations are leaning towards a slowdown in rate cuts, several external factors are temporarily supporting the precious metal.
Also read: What will the price of gold be in 2025?
A slight drop in bond yields in the United States puts the American dollar under pressure, providing some respite to the gold market. Furthermore, persistent geopolitical risks, linked in particular to the Middle East and Eastern Europe, contribute to strengthening demand for this safe haven asset.
Geopolitics and economics: key variables
International tensions continue to influence the trajectory of the yellow metal. In Israel, the announcement of an expansion plan in Golan Heights raises fears of an intensification of regional conflicts. In Gaza, clashes continue, while in Syria, targeted strikes on strategic sites are exacerbating instability.
In Europe, NATO’s secretary general expressed concerns about Russia’s ambitions, warning of possible escalations in Ukraine and elsewhere. These uncertainties, coupled with market volatility, maintain sustained interest in gold despite economic obstacles.
A Fed in the spotlight: what expectations for Wednesday?
Investors’ attention is turning to monetary policy decision of the Fed expected on Wednesday. According to the CME Group’s FedWatch tool, more than 93% of markets anticipate a 25 basis point reduction in interest rates. However, the latest economic indicators, notably the Consumer Price Index (CPI) and the Producer Price Index (PPI), suggest that the Fed could slow the pace of its rate cuts in 2025.
Technical analysis: thresholds to monitor
On a technical level, the gold price is currently around the critical zone of $2,644 to $2,643. A break below this threshold could pave the way for a decline towards $2,625 and then towards major support at $2,600. Conversely, a recovery beyond $2,666 could target a target of $2,700, or even $2,726 if momentum continues.
Interest rate: what is the link with gold?
THE interest rate play a determining role in gold movements. When these rise, they make fixed-yielding assets more attractive, thereby reducing interest in the precious metal. At the same time, a rise in rates tends to strengthen the dollar, which exerts downward pressure on gold, denominated in American currency.
Fed decisions, such as federal funds ratedirectly influence financial markets and guide investors’ expectations. In the short term, these factors continue to guide the movements of XAU/USD.
Outlook for the coming days
As global markets digest recent economic and geopolitical events, volatility may remain elevated. The precious metal seems caught in a precarious balance between demand for safe haven assets and uncertainties linked to the future directions of US monetary policy.
The next few days promise to be decisive for theevolution of gold pricesagainst the backdrop of discussions on interest rates and international tensions as still palpable.
