Gold finds support at $2,630, but stays capped ahead of the Fed’s announcement.
Gold (XAUUSD) is almost flat on Wednesday after recovering from a one-week low the previous day. The precious metal is on the defensive as the market awaits the outcome of the Federal Reserve’s (Fed) final meeting of the year.
The market bracing for a “hawkish cut” from the Fed, which could support the US dollar while weighing on gold.
The Fed widely expected to decrease interest rates by 25 basis points (bps); nonetheless, economic and rate hike estimates will likely indicate a hawkish tilt on the central bank’s Forward guidance.
Recent US data suggest that economic activity continues strong, consumption is rising, and inflationary pressures are high. Beyond that, US President-elect Donald Trump’s policies are projected to increase price pressures.
This prompted investors to reduce their expectations for monetary easing, resulting in a dramatic rise in US Treasury yields and a drop in gold prices.
Daily Market Update:Gold fragile on concerns about a hawkish Fed.
The US Retail Sales report issued on Tuesday showed a 0.7% gain in November, up from an upwardly revised 0.5% rise in October and beyond estimates of 0.5% growth.
Consumption accounts for more than 60% of US GDP, and these data support the concept of US economic exceptionalism in the midst of a worldwide economic recession.
US Data released earlier this week revealed an unexpected increase in service activity, suggesting to strong economic growth in the fourth quarter.
According to the CME Group’s FedWatch Tool, futures markets are almost fully pricing a 25 basis point interest rate decrease on Wednesday, with less than a 30% possibility of more than two quarter-point cuts in 2025.
