Gold price holds steady at $2,600 despite Fed hawkishness

Despite ending the week in negative territory, the gold market still maintained an important support level around the $2,600/ounce threshold, even as the US Federal Reserve (FED) signaled that it would slow down the pace of interest rate cuts in 2025.

Gold struggled last week as investors braced for a hawkish Fed announcement that it would cut interest rates.

As expected, the Fed cut the federal funds rate by 25 basis points. However, new economic projections show that the rate forecast, or “dot plot,” points to just two rate cuts next year, bringing the benchmark rate to 4%. In September, the Fed had forecast four cuts in the new year.

Analysts note that gold could still face challenges in this holiday-shortened trading week.

Gold's path of least resistance is likely to be lower in the short term, commodity analysts at TD Securities said in a note Thursday.

“While we do not expect a collapse in the gold market, given the uncertainty surrounding Fed policy, particularly if inflation continues to be higher than expected (e.g. due to tariffs) and the economy begins to slow, coupled with renewed geopolitical risks and a renewed round of central bank gold buying, there is still room for gold to fall slightly in the short term. It would not be surprising to see prices fall to the November low of $2,537/oz,” the analysts said.

However, some other experts see gold being caught in a tug-of-war between the Fed's monetary policy and geopolitical uncertainty.

Gold held key support on Friday after the U.S. Congress failed to pass a spending bill before the holiday break. The government is again on the brink of a partial shutdown that could affect everything from border security to national parks and furlough up to two million workers.

“The prospect of another government shutdown shows how much geopolitical uncertainty there is,” said Chris Mancini, portfolio manager at Gabelli Gold Fund (GOLDX). “This will continue to support gold as a safe-haven asset.”

Ryan McIntyre, managing partner at Sprott Inc., said he is looking beyond gold's short-term volatility, stressing that geopolitical and financial market uncertainty will continue to fuel long-term demand for gold as a safe-haven asset.

“The Trump administration hasn't even started yet, and we're already dealing with this,” he said.

During the upcoming Christmas week, although most traders will put their work aside to enjoy the festive atmosphere, the market is still waiting for a series of important economic data to be released, and according to analysts, a sharp drop in trading volume could cause the gold market to face major fluctuations.