Gold prices steady ahead of US Fed meeting: Key factors investors should watch – CNBC TV18
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Key influences on gold prices
The Federal Reserve is widely expected to announce a 25-basis-point rate cut at its final policy meeting of 2024.
However, analysts are keen to assess the Fed’s broader outlook, particularly for 2025.
According to Jigar Trivedi, Senior Analyst at Reliance Securities, while a rate cut is almost priced in, the real focus will be on the Fed’s future stance.
“The 2025 outlook, the Fed dot chart, and Powell’s statements will be key to gauge the Fed’s stance for the first half of next year,” Trivedi said, adding that a potential technical correction in gold prices could present a buying opportunity for investors.
Market expectations are leaning heavily toward a quarter-point rate cut, with a 96.3% chance of this outcome, according to CME’s FedWatch tool. However, the probability of a similar reduction in January 2025 is much lower, at just 16.5%.
As central banks globally, including the Bank of Japan, the European Central Bank, and others, prepare for their own policy decisions, investors are bracing for potential shifts in monetary policy that could impact gold’s attractiveness as a safe-haven asset.
Gold in the context of global economic and geopolitical risks
Non-yielding gold tends to perform well in low-interest-rate environments, as well as during periods of economic or geopolitical uncertainty.
Geopolitical tensions are adding another layer of support to gold prices, as the US imposed new sanctions on North Korea and Russia, targeting financial activities and military support.
These developments could exacerbate market volatility, which tends to favor gold as a stable store of value.
The market is also looking closely at upcoming US data, including GDP and inflation figures, which could further influence market sentiment and gold’s trajectory.
Gold’s outlook in India and global demand factors
In India, the 24-carat gold rate on December 17 stood at ₹77,030 per 10 grams, while the rate for 22-carat gold was ₹70,611 per 10 grams.
Renisha Chainani, Head of Research at Augmont – Gold For All, noted that investors are anticipating a rate cut and closely watching the Fed’s economic forecasts.
Chainani also highlighted that Central Bank purchases, particularly from China, are a significant factor supporting gold prices.
After a six-month break, China’s central bank resumed gold buying in November, contributing to bullish sentiment in the bullion market.
China’s gold purchases are expected to continue as the country braces for potential trade tensions under Trump’s policies.
Chainani suggested that these central bank actions could help sustain gold’s price floor around ₹76,900 per 10 grams.
Investment opportunities and risks
For investors, gold continues to be a solid hedge against inflation and geopolitical risk, but with prices hovering near the $2,600 per ounce level, the question remains whether gold will continue to rise or face a technical pullback.
According to Trivedi, while a correction could be in the cards, it may present a buying opportunity for those looking to go long on gold.
