Gold prices fluctuate strongly due to geopolitical tensions and the FED

Gold futures had a volatile trading session today, with the precious metal recovering after a sharp decline that saw prices drop nearly $93 the previous day.

Currently, the December gold contract is up 14.6 USD, stable at 2,633.10 USD/ounce. Meanwhile, the spot gold price listed on Kitco at 13:20 on November 27, 2024 is at 2,641 USD/ounce.

The sharp drop in gold prices yesterday came amid fresh geopolitical developments in the Middle East. Reports say Israel and Lebanon are negotiating a potential ceasefire. Several media outlets have reported that the Israeli cabinet is considering a 60-day deal to de-escalate tensions with the Hezbollah militia.

Meanwhile, the minutes of the Federal Reserve's November meeting were just released, providing important information about the agency's economic outlook.

Fed officials expressed growing confidence in the direction of the economy, particularly inflation and the labor market. The minutes showed policymakers believed inflation was moving closer to the Fed's 2 percent target and assessed the current labor market as strong.

These observations have important implications for monetary policy. The Federal Open Market Committee (FOMC) voted unanimously to cut its benchmark interest rate by another quarter of a percentage point, bringing the target range down to 4.5%-4.75%.

Market expectations remain divided on the likelihood of future rate cuts, with the CME FedWatch tool showing a 63.1% chance of another rate cut at the December meeting.

The economic landscape is further complicated by potential policy changes from the new administration. President-elect Donald Trump’s proposed economic strategies, including imposing significant tariffs on imports from Canada, Mexico and China, are drawing the attention of financial analysts.

Saxo Bank said that Mr Trump's plans for tariffs, tax cuts and deportations could cause high inflation, making gold an attractive safe-haven asset for investors seeking protection against economic uncertainty.

Notably, the Fed meeting minutes showed a conspicuous absence of detailed discussion of potential policy implications from the election.

While members acknowledged a general sense of uncertainty about changing economic conditions, they remained cautious about pinpointing the exact timing of when interest rates would reach a “neutral” level—neither stimulating nor restraining economic growth.

Investors and market watchers continue to closely monitor these developments, as gold prices reflect the complex interplay between geopolitical tensions, monetary policy and potential fiscal shifts.

The value of the precious metal remains sensitive to global economic indicators and political developments, making it an important gauge of broader market sentiment.