Gold prices edged slightly lower on Tuesday, trading near $4,195 per ounce, as investors showed caution ahead of the Federal Reserve's crucial two-day policy meeting. The Federal Open Market Committee (FOMC) is widely expected to announce a 25-basis-point interest rate cut on Wednesday, December 10, 2025. This anticipated move has kept market participants on edge, weighing on the non-yielding precious metal in early trading.^[1][2][3] ### Fed Poised for Rate Reduction Amid Mixed Signals The upcoming FOMC decision, scheduled for December 9-10, is the central bank's final policy meeting of the year. Financial markets are pricing in an approximately 80% to 90% probability of a 25-basis-point rate reduction.^{[4][5][6][2][3][7]} This would bring the federal funds target rate to a range of 3.50% to 3.75%, according to economists at Comerica Economics.^[8] However, despite the strong expectations for a cut, gold's recent rally has shown signs of losing momentum.^[9] Spot gold was trading around $4,195 per ounce in early Asian sessions on Tuesday, reflecting a slight dip.^[2] Analysts suggest that while lower interest rates generally make gold more attractive by reducing the opportunity cost of holding the non-yielding asset, investor sentiment remains cautious.^[10][4][2] Manoj Kumar Jain, of Prithvifinmart Commodity Research, noted that uncertainty surrounding inflation figures is fueling speculation that the U.S. Fed might adopt a "hawkish tone" during its policy review.^[11] A hawkish cut implies a rate reduction accompanied by a cautious outlook for future policy, which could support the US Dollar and limit gold's upside.^[12][2] ### Divisions Within the Federal Reserve The path forward for the Federal Reserve appears complicated by internal divisions among FOMC members. Officials are grappling with conflicting economic trends, including a cooling job market and inflation that remains above the Fed's 2% target.^[8][6] Adding to the complexity are gaps in recent economic data due to a government shutdown, hindering the central bank's ability to fully assess key economic trends.^[13][5][6] Bill Adams, Chief Economist for Comerica Bank, highlighted the likelihood of the Fed remaining "tight-lipped about the outlook for rates in 2026," given these differing views.^[8] Some members favor further rate cuts to support the labor market and guard against a potential economic slowdown. Others prefer a pause to ensure inflation does not reaccelerate.^[6] This internal debate makes the upcoming policy statement and Fed Chair Jerome Powell's comments particularly important for market direction.^[7] ### Key Economic Data and Market Reactions Traders are closely monitoring additional economic reports this week for further clues on the health of the U.S. economy. These include the JOLTS job openings report, scheduled for release on Tuesday, December 9, and the Employment Cost Index on December 10.^[12][14][2] Weak-than-expected outcomes in these reports could reinforce expectations for a U.S. rate reduction, potentially offering some support to gold.^[2] The gold market has experienced some volatility, with prices remaining near $4,200 per ounce on Monday after a weekly decline.^[12] However, it saw four consecutive months of significant gains leading into December, driven by expectations of lower U.S. interest rates.^[1] Despite the current cautious mood, several underlying factors continue to support gold's long-term appeal. ### Strong Demand Bolsters Gold's Foundation Even with short-term fluctuations, gold has demonstrated remarkable strength throughout the year, with prices up nearly 60% year-to-date.^[12] This performance is largely attributed to robust central bank buying, healthy inflows into Exchange-Traded Funds (ETFs), and increased demand for safe-haven assets amidst geopolitical tensions.^{[12][14][15][16][17][18]} China's central bank, for instance, has consistently increased its gold holdings, marking its 13th consecutive month of additions to reserves.^[12][14][11] This sustained institutional demand, coupled with ongoing global uncertainties, provides a strong foundation for gold prices. Praveen Singh, Senior Fundamental Research Analyst- Currencies and Commodities at Mirae Asset Sharekhan, advises investors to "buy on dips," suggesting a belief in gold's continued upward trajectory.^[14] Looking beyond the immediate FOMC decision, analysts forecast a generally bullish outlook for gold. J.P. Morgan Research expects gold prices to average $3,675 per ounce by the fourth quarter of 2025, with projections rising towards $4,000 per ounce by the second quarter of 2026.^[16] Some long-term forecasts even suggest gold could climb toward $5,107 per ounce by the end of the decade, assuming supportive macroeconomic conditions persist.^[15][18][19] The Federal Reserve's policy announcement on Wednesday will be critical in shaping market sentiment for gold and other assets as the year draws to a close and investors look ahead to 2026.

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