Gold trades firmly below all-time high on Fed, Geopolitical risks

LONDON (December 15) Gold (XAU/USD) kicks off the week on a firm footing, extending its advance for a fifth consecutive day as uncertainty over the Federal Reserve’s (Fed) monetary policy outlook keeps traders defensive. At the time of writing, XAU/USD is trading around $4,345, just shy of its all-time high near $4,381, marked on October 20.

From a broader macro perspective, the metal remains supported by persistent geopolitical tensions. At the same time, continued strong central bank demand and robust inflows into Gold-backed exchange-traded funds (ETFs) are providing a steady tailwind for prices.

Investors are also positioning for a busy US economic calendar in the days ahead, with upcoming data likely to shape expectations around the Fed's policy path into 2026. The spotlight this week falls on the delayed October and November Nonfarm Payrolls (NFP) report, due to be released on Tuesday, followed by the Consumer Price Index (CPI) on Thursday.

Market movers: Markets stay defensive amid China slowdown and cautious Fed signals

• China’s latest economic indicators highlighted a broadening slowdown in the world’s second-largest economy, with November industrial output expanding 4.8% year-on-year, below expectations and slightly slower than October, while retail sales rose just 1.3%, marking their weakest gain since late 2022. The softer data have reinforced concerns about global growth, supporting risk-averse sentiment and underpinning safe-haven demand for Gold.
• Geopolitical tensions remain elevated amid stalled US-led peace talks between Russia and Ukraine. Reuters reported that Ukrainian President Volodymyr Zelenskiy offered to drop Ukraine’s bid to join the NATO military alliance in exchange for Western security guarantees, as part of efforts to end the war with Russia. The proposal would meet one of Moscow’s key war aims, although Kyiv has so far held firm against ceding territory to Russia.
• The Fed lowered borrowing costs by 25 basis points (bps) last week in a 9-3 vote, bringing the policy rate to a 3.50%-3.75% range, and signalled a “wait-and-see” approach to further easing as policymakers balance ongoing labour-market softness against still-sticky inflation.
• In the post-meeting press conference, Fed Chair Jerome Powell said the central bank is “well positioned to wait and see how the economy evolves,” while acknowledging risks on both sides of the Fed’s dual mandate. The relatively less hawkish tone prompted traders to price in two rate cuts next year, even as the latest dot plot points to just one.
• Two of the three dissenters, including Chicago Fed President Austan Goolsbee and Kansas City Fed President Jeffrey Schmid, preferred to leave rates unchanged. Goolsbee said on Friday he favoured waiting for greater clarity on inflation before easing further, while Schmid argued that little had changed since the previous meeting, emphasising that inflation remains too high and the economy still shows momentum with a labor market that’s cooling but largely balanced.
• Looking ahead, the US economic calendar is light on Monday, with the New York Empire State Manufacturing Index due for release. Markets will also parse comments from Fed Governor Stephen Miran, who dissented in favour of a larger 50 basis point rate cut, alongside remarks from New York Fed President John Williams later in the day.

FXStreet