Gold price increases, many central banks continue to buy

According to Gary S.Wagner - commodity broker and market analyst at Kitco, both gold and silver are rising, as investors proactively position ahead of the much-anticipated monetary policy decision of the US Federal Reserve (Fed), scheduled to announce at 2:00 p.m. Eastern time (EST) on Wednesday, after the FOMC meeting this month ended.

Marketers will also be closely watching the following press conference of Fed Chairman Jerome Powell to seek clues on the monetary policy roadmap in 2025.

Expectations of interest rate cuts are almost certain

According to Trading Economics (a global economic and financial data platform), "The futures market is likely to be almost certain to cut by 25 basis points this week. That leaves the short-term policy easing roadmap open, but also leaves open the possibility of the Fed signaling a temporary holddown in early 2025."

The CME FedWatch tool now shows an 87% probability of the Fed cutting interest rates by another 0.25 percentage points at tomorrow's meeting, reflecting the market's broad consensus.

Central banks continue to strongly accumulate gold

This loose monetary policy stance continues to create a fundamental support for physical gold demand, as central banks maintain their position as significant net buyers.

China added to its official gold reserves for the 13th consecutive month in November, bringing its total holdings to 74.12 million ounces.

The continued accumulation of the People's Bank of China, combined with strong buying activities by many other central banks and capital flows into the ETF SPDR Gold Shares (GLD), is becoming a structural driving force for gold's impressive 60% increase since the beginning of the year.

Coordinated global buying reflects broader concerns about currency depreciation risks, geopolitical instability, and the strategic importance of diversifying reserves away from traditional USD-denominated assets.

Mixed job signals keep Fed data-dependent

The newly released US Government employment data shows a shade- bright spot in the labor market. Although the Ministry of Labor recorded an increase in the number of fireworks displacements in October, the overall job market has remained stable since the summer, according to the JOLTS survey.

The number of recruitment positions increased to about 7.67 million in October - this figure, when combined with recent salary table data, reinforced the Fed's commitment to making decisions based on actual data.

The resilience of the labor market gives the Fed flexibility to continue its easing cycle without worrying about triggering an "excessive heat" economic situation, while avoiding the need for emergency interest rate cuts - which could send a bad signal about the risk of recession.

Contradictory views on gold price prospects

Not all experts are optimistic about the precious metal. The pheasants believe that gold prices will weaken as the monetary policy easing cycle loses momentum next year.

Alex Kuptsikevich, senior market analyst at FxPro, noted the change in rate cut expectations: Defense tools now expect two rate cuts in 2025, even a week before, the market still expects three.

This adjustment reflects market sentiment that the Fed could be more cautious about continuing to cut interest rates, especially if inflation is more persistent than expected or economic growth remains strong.

This scenario could limit gold's upward momentum, although the current strength of the precious metal shows that the market is pricing in factors far beyond interest rate policy.

The precious metal's rally is reflecting the convergence of many factors: US economic data is supportive, strengthening the possibility of the Fed continuing to loosen; overwhelming expectations for the decision to cut interest rates tomorrow; and structural demand from central banks that have not shown any signs of cooling down.

As we approach the final FOMC decision for 2024, the precious metals market appears to be in a favorable position to maintain its upward momentum, unless Chairman Powell makes a surprising " Hawl" signal at tomorrow afternoon's press conference.