Lower Rates Sustain Demand for Non-Yielding Assets

The FOMC meeting in December was clear: even though there were some internal disagreements, most of the Fed’s policymakers still think there’s room for further easing if inflation continues to slow. The upshot is lower interest rates, which make holding non-yielding assets like gold much less costly, keeping demand for them afloat.

Geopolitical Risks and Market Caution Shape Near-Term Outlook

The ongoing conflicts and tensions between nations have added a big layer of uncertainty to the mix, which in turn has led investors to stick with the tried and true safe haven assets that always seem to do well during times of uncertainty – and gold is no exception.

The big question is: will its price hold at record levels despite the inevitable pullbacks? That said, we do face some near-term headwinds.

The first is that after a gain as sharp as gold’s, some people will want to cash in their profits, which could lead to selling pressure. The CME Group has also decided to up the margin requirements for gold and other metals, which is likely to make it a little more expensive to speculate on the price of gold, and that could also dampen demand.

Looking ahead, gold is likely to remain well-supported as long as rate-cut expectations and geopolitical tensions continue to simmer. However, with US markets set to release a batch of important data, including the final Manufacturing PMI, traders are likely to keep a close eye on how it all plays out, especially its impact on the dollar and the Fed’s next move.

Short-Term Forecast

Gold may consolidate between $4,350–$4,450 in the near term, with dips attracting buyers above $4,300, while a break above $4,400 could reopen the path toward $4,475.