In Monday's trading, spot gold continued to fluctuate lower, trading around $2,654.40 per ounce, with multiple moving averages on the daily chart still exerting pressure on gold prices. Although geopolitical instability and expectations of a Fed rate cut provided some support for gold, the strong performance of the dollar and U.S. bond yields posed further downside risks for gold prices.
U.S. Economic Data Supports the Dollar
The U.S. services PMI in November rose significantly, from 56.1 to 58.5, hitting a 38-month high. Meanwhile, the composite PMI also increased from 54.9 to 56.6, indicating strong economic expansion momentum. In addition, U.S. retail sales data is expected to be optimistic, with the market anticipating a month-on-month growth of 0.5%. If this expectation is realized, it will be the best performance since April.
According to the Atlanta Fed's GDPNow model, U.S. GDP growth for the fourth quarter is expected to be 3.3%. This strong economic performance further pushed up U.S. Treasury yields and provided support for the dollar.
Fed Policy Direction and Market Expectations
The market widely expects the Fed to release a hawkish signal at this week's meeting, suggesting that the number of rate cuts next year may be reduced. Expectations for the Fed's future policies are gradually changing, with forecasts for only a 25 basis point rate cut for the entire year of 2025. The possibility of no rate cuts has risen to 37%, keeping market expectations for the dollar strong.
Geopolitical Tensions and the Global Economy
Geopolitical tensions remain high, especially with the conflict between Israel and Hamas and the ongoing Russia-Ukraine war showing no signs of easing. The U.S. has imposed a new round of sanctions on North Korea and Russia, further exacerbating global uncertainties. Additionally, Russia and the U.S. have heightened missile test confrontations and plan to increase nuclear weapon tests, adding more risks to global markets.
Global Central Bank Rate Cuts and Economic Slowdown Expectations
Many global central banks remain in a rate-cutting cycle, with Sweden's central bank expected to cut rates by 50 basis points this week. Meanwhile, the French central bank reported that due to increased domestic political turmoil and global economic uncertainties, France's economic growth over the next two years will fall short of expectations. The decline in U.S. manufacturing PMI and factory output index also indicates pressure on global economic growth, which may further affect the direction of global monetary policies.
Overall, although gold prices are supported by geopolitical tensions and Fed rate cut expectations, strong U.S. economic data and a strong dollar still exert pressure on gold prices. Gold is expected to maintain a fluctuating trend in the short term, lacking further upward momentum.
