On Tuesday (December 10), the price of spot gold climbed to a two-week high, supported by escalating geopolitical tensions in the Middle East and strong market expectations for a Federal Reserve rate cut in December. At the time of writing, spot gold rose 0.75%, quoted at $2,680.15 per ounce. The dual push from geopolitical uncertainty and accommodative monetary policy further solidifies gold's position as a safe haven among global investors.
Recently, weak performance of the U.S. employment report has strengthened the market's bets on an imminent rate cut by the Federal Reserve. According to the Chicago Mercantile Exchange's FedWatch tool, traders now estimate an 86% chance of a 25 basis point rate cut by the Federal Reserve at the December meeting, a significant increase from 73% last week. Meanwhile, news of China resuming gold purchases after a six-month pause further boosted market sentiment.
Geopolitics and Monetary Policy Support Gold Prices
Increased tensions in southern Syria have also been a key driver of rising gold prices. According to sources, Israeli forces have advanced to 25 kilometers southwest of Damascus and conducted airstrikes on Syrian military targets. This news sparked safe haven sentiment in the market, even though Israel denied actions beyond the buffer zone, the geopolitical uncertainty continues to provide strong support for gold prices.
From a global macro perspective, China's central bank is expected to adopt a "moderately loose" monetary policy and more proactive fiscal policy next year to stimulate economic growth, which also provides long-term benefits for the gold market. With expectations of further rate cuts by major central banks and a weakening dollar, gold is likely to continue its upward momentum, potentially reaching new highs by 2025.
Inflation Data Becomes Market Focus
Later this week, key U.S. inflation data, including Wednesday's Consumer Price Index (CPI) and Thursday's Producer Price Index (PPI), are set to be released. Investors are closely watching whether these data will influence the Federal Reserve's path on rate cuts. If inflation data beats expectations, it may weaken the market's anticipation of further Fed rate cuts into 2024, posing resistance to gold bulls. Conversely, if inflation data is weak, it will further enhance the likelihood of accommodative policies, driving gold prices up.
Non-yielding gold typically performs strongly in low-interest-rate environments. Analysts note that the Federal Reserve's policy path, dollar performance, and geopolitical risks will be the three key factors determining the future direction of gold prices.
Performance in Other Precious Metals Markets
In addition to gold, the performance of other precious metals markets is mixed. Spot silver rose 0.3% to $31.90 per ounce; platinum increased by 0.2%, reaching $940.85 per ounce; while palladium fell 0.6% to $967.57 per ounce. The price movements of these metals are also influenced by geopolitical and economic policies, but compared to gold, market volatility is relatively smaller.
Interplay of Risk Aversion and Economic Policies
In the future, the trend of gold prices will continue to be influenced by the dual impact of risk aversion and economic policies. Against the backdrop of increased geopolitical instability and continued accommodative policies by major central banks, the demand for gold as a safe haven may remain strong. However, key U.S. inflation data and global economic dynamics will provide important guidance for gold prices.
Investors should closely monitor economic data, geopolitical developments, and global central bank policy dynamics in the upcoming weeks to better grasp opportunities and risks in the gold market. Meanwhile, the performance of other precious metals will also be affected by similar factors, warranting further analysis and monitoring.
