The COMEX gold prices fell on Monday, as the market anticipates that the US Federal Reserve will not cut interest rates next year.
Gold is less in demand due to higher interest rates. It’s a non-yielding metal, unlike bonds.
At its December meeting, the US Fed indicated that it may adopt a cautious approach in the coming year as the US economy remains resilient.
Gold prices were muted Monday, after rising earlier during the session. The volume of trade remained low in the run-up to New Year.
The February gold contract at COMEX closed on Tuesday, January 29, 2012, at $2,624.91 an ounce. This is a 0.3% decrease from the previous closing price.
Cautionary Fed Approach
In line with expectations, the US Central Bank cut interest rates 25 basis points at its December meeting.
In 2024, the Fed cut rates by 100 basis points over three meetings.
First, the bank shocked the market in September with a 50-bps cut.
The Fed cut interest rates by 25 basis points in each of the meetings that followed, held in November and December.
Market participants expected the Fed to reduce rates by 150 basis points (bps) in total earlier this year.
The central bank was forced to take more care with its cuts due to the resilient US labour market and the sticky inflation.
Akhtar FXstreet analyst Akhtar Faruqui said in a recent report that the Federal Reserve has signaled more caution in regards to additional rate cuts for 2025.
This new development brings to light the uncertainties that surround future policy changes in the context of the economic strategies anticipated by the incoming Trump Administration.
The market expects the bank to reduce rates by two percentage points next year instead of the four-times projected earlier.
Geopolitical tensions
A rise in demand for safe-haven assets due to increased geopolitical tensions could support gold.
Investors have become more risk-averse due to the prolonged conflict between Russia & Ukraine.
The Russian Federal Security Service announced last week that it foiled multiple assassination attempts by Ukraine against high-ranking Russian officials and their families.
The tension in the Middle East remained also high.
Israeli forces attacked two hospitals on Sunday in the northern Gaza Strip, including an attack on the upper floors of al-Wafaa Hospital, in Gaza City. At least seven people were killed and others critically injured.
Gold’s stunning returns
Gold prices are on track to finish the year with a 27% gain. The precious metal has seen its best return since 2010.
Gold prices have risen by more than 30% in the last few years.
COMEX gold prices have reached a number of records highs by 2024. In September, it had reached $2600 per ounce.
As geopolitical tensions in the Middle East increased, investors began to demand safe havens.
The resistance level for gold remains at $2.700 while the support lies around $2.583.39.
This post Gold drops amid thin trade volume; safe-haven demands may limit downside can be updated as new information unfolds
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