The Gold Market's Significant Fluctuations: Global Central Bank Policies as Key Factors
Last week, the gold market experienced significant fluctuations. COMEX gold futures prices fell sharply during the last two trading days, with spot gold prices hitting a low of $2,645 per ounce on Friday, marking a single-day drop of 1.22%, and closing at $2,647.49 per ounce. Adjustments in global central bank monetary policies have become an important factor affecting gold prices.
The Swiss National Bank announced a 50 basis point rate cut, the European Central Bank cut rates by 25 basis points, and a slight increase in the U.S. Consumer Price Index (CPI) strengthened the dollar, collectively putting downward pressure on gold prices.
The Fed's Slower Rate Cuts and Inflation Data Spark Market Concerns
U.S. inflation data is one of the core factors behind the recent fluctuations in the gold market. In November, the CPI grew by 2.7% year-on-year, the highest increase since July, and core CPI grew by 3.3% year-on-year, both in line with market expectations. However, the Producer Price Index (PPI) grew by 3% year-on-year, the largest increase since February 2023, exceeding expectations and previous values. This suggests that U.S. inflation is accelerating, but not enough to change the Fed's decision to continue rate cuts this month, heightening concerns about the rate cut path next year.
The market expects the Fed to cut rates by 25 basis points for the third consecutive time this week, but analysts believe the pace of rate cuts in 2024 and 2025 may be slower than previously anticipated. Most economists predict the Fed will only cut rates three times in 2025, exerting ongoing pressure on the gold market.
Diverging Global Central Bank Policies Impact Gold Demand
U.S. policy dynamics are not the only factor affecting gold; the monetary policies of other major economies are also adjusting. The rate cuts by the Swiss National Bank and the European Central Bank, while injecting liquidity into the market, have not effectively boosted gold prices. Meanwhile, the Bank of Japan will hold its final policy meeting of the year this week, with market expectations that it will pause its rate hike cycle, reflecting the cautious outlook on the future economic prospects of major global economies.
Under the dual pressure of a strong dollar and a shift in monetary policy, gold's appeal as a safe-haven asset has diminished, making it difficult to find support in the short term.
Gold Market Outlook: Focus on Fed Policy and Dollar Trends
The future trajectory of the gold market will be influenced by the following factors:
- Fed Policy Dynamics: The path of rate cuts and inflation response measures will be the core drivers of gold prices.
- Divergence in Global Monetary Policies: Loose or tight policies by major central banks will directly affect gold demand and price fluctuations.
- Strong Dollar: The ongoing strength of the dollar may further suppress gold prices.
Despite recent pressure on gold prices, the market needs to closely watch the upcoming Fed policy meeting and subsequent press conference. The Fed's statements on the future pace of rate cuts will directly determine the short-term direction of gold prices. Meanwhile, adjustments in other major central banks' policies may introduce new variables into the gold market.
In the short term, the gold market may continue its volatile pattern. Investors need to be vigilant about market fluctuations while keeping an eye on global economic data and policy dynamics to cautiously plan future investment strategies.
