Will Gold Break $2,625 Amid Fed Caution and Geopolitical Risks?

During the early Asian session on Thursday, the gold price (XAU/USD) was up slightly by roughly $2,625. Uncertainty around Donald Trump's trade policy, geopolitical conflicts, and increased central bank gold demand all bolster the yellow metal. However, the US Federal Reserve's (Fed) cautious posture may restrict gold's potential rise.

Traders are looking for new factors that could impact the Fed's interest rate forecast this year. Fed Chair Jerome Powell signaled in December that he would be cautious about further rate cuts after a 25 basis point reduction. This stance may give the Greenback some strength, undermining the USD-denominated gold price.

On Thursday, the US weekly Initial Jobless Claims report may provide more information about the strength of the US labor market. Meanwhile, on Friday, the US S&P Global Manufacturing PMI for December will be closely watched for further signals of economic growth or downturn.

On the other hand, policy uncertainty surrounding incoming President Donald Trump may increase the attraction of the precious metal as a haven. Geopolitical concerns, notably in the Middle East and the continuing Russia-Ukraine war, are expected to linger throughout the year, reinforcing gold's safe haven position and increasing demand.

A rise in global central bank gold purchases is projected to support the precious metal's upward trend. According to the World Gold Council study, major central banks are projected to buy more gold during the next year, boosting demand for the yellow metal.

Summary

Gold prices (XAU/USD) remain constant at $2,625, boosted by rising central bank demand, geopolitical uncertainty, and Donald Trump's unpredictable policy. However, the US Federal Reserve's cautious approach to interest rate decreases may limit the yellow metal's potential for large gains. Geopolitical uncertainties, particularly in the Middle East and Ukraine, as well as a potential increase in global central bank gold purchases, are projected to keep gold's safe-haven appeal. Key US economic data, such as Initial Jobless Claims and the S&P Global Manufacturing PMI, are likely to have an impact on the gold market in the coming days.