Global gold prices witnessed a noticeable decline in Monday’s trading, after a series of increases that lasted for four consecutive days. This decline is due to several factors, most notably the rise in the US dollar and profit-taking by some investors. With increasing expectations of the release of important US economic data, investors are anticipating the impact of this data on the monetary policy that the US Federal Reserve will follow in the near future.
main reason for the decline in gold is the significant rise in the dollar index, as gold priced in US dollars has become more expensive for foreign investors. The process of profit-taking after a period of increases has also contributed to withdrawing some liquidity from the gold markets. Prices often fluctuate significantly when new economic indicators emerge that could influence future decisions of the US Federal Reserve.
Geopolitical effects on Gold
On the other hand, the decline in geopolitical risks in recent period has also played a role in affecting the price of gold. Gold is one of the most prominent safe havens in times of political or economic tensions, as investors rush to buy it as a means of protecting their money. But as political conditions improve and fears subside, demand for gold declines, leading to lower prices.
US data expectations and their impact on markets
The focus now turns to upcoming economic data from the United States, which may provide clues about whether the Federal Reserve will continue to raise interest rates. If the data is strong and shows continued strength in the US economy, this will increase the chances of tightening monetary policy, supporting the US dollar. In turn, this will increase the cost of gold for foreign investors, contributing to a decline in its prices.
Compared to other commodity markets
Despite the decline in gold prices, other markets may see a similar response based on developments in the US dollar. Gold is often inversely correlated with the movement of the US dollar; as the dollar rises, gold prices fall, and vice versa. Investors in commodity markets constantly monitor these interactions to make informed decisions regarding their investments in precious metals.
Gold prices continue to fluctuate in light of global economic shifts. The US dollar index and the economic data expected to be announced in the coming days mainly affect them. In light of these variables, investors should follow the situation closely to know how the Federal Reserve’s monetary policy will affect the markets in the near future.
Anticipate in important economic data and its impact on the markets
This week, investors are awaiting the release of key US economic data that may significantly affect market expectations regarding future monetary policy. Among these reports, the most prominent are the US job openings data, in addition to the employment report from ADP, and the non-farm payrolls report from the US Department of Labor. These reports are among the basic indicators used by the US Federal Reserve to determine the direction of monetary policy in the future.
In addition to this data, several senior Federal Reserve officials, including Federal Reserve Chairman Jerome Powell, are expected to speak. The statements of these officials will be of great importance, as they could provide signals about the Fed’s intentions to raise or lower interest rates in the coming period.
Market expectations for interest rates
According to the US Interest Rate Market Expectations Monitor, available through Investing Saudi Arabia, markets currently see a 67.1% chance of a 25-basis point interest rate cut in December.
Gold weak performance in November
If the Federal Reserve decides to take more explicit steps to keep interest rates at stable levels until 2025, this move could affect some assets such as gold. Higher interest rates reduce the attractiveness of gold as an investment tool because gold does not generate returns, unlike other assets that can benefit from higher interest rates.
Despite concerns related to monetary policy, gold witnessed a decline in prices during November. Its prices fell by more than 3%, recording its worst monthly performance since September 2023. This decline was due to a combination of factors, most notably concerns that trade policy under the incoming Trump administration may contribute to imposing higher tariffs, which means that interest rates may remain high for a longer period.
Rising interest rates pose a challenge for gold, as investors prefer assets that offer higher returns in high interest environments. On the other hand, people consider gold a safe haven during economic crises, but raising interest rates reduces its appeal and harms demand for it. Market Outlook
Under these circumstances, expectations indicate that gold may face further pressure in the coming period, especially if the Federal Reserve continues to adopt a tighter monetary policy. If the economy cuts interest rates in December, it may increase gold’s attractiveness as a safe haven. However, if the Fed continues to indicate a longer-term interest rate hike, this is likely to reduce the attractiveness of gold, pushing its prices further down.
The week of US economic data is an important period in financial markets, as it will help determine the path of future monetary policy. Data related to employment and interest will continue to influence the movement of gold and currency prices.
