Gold is just 1% away from its all-time high of Rs 80000, after a modest core inflation reading this week that boosted bets for a more dovish Federal Reserve policy.

Gold rises as Treasury yields fall due to better-than-expected US core inflation. In contrast to last week’s projection of a 25 basis point rate cut, traders now predict the Fed may lower rates by 40 basis points by the end of 2025.

The positive developments that a ceasefire in the Israel-Hamas battle in Gaza is getting closer and that talks to end the conflict are nearing completion are causing a decline in the price of precious metals.

Gold continued its winning streak due to safe-haven demand sparked by worries about Donald Trump’s proposed policies, while the UK faced a budget crisis.

In response to Fed minutes that suggested a possible delay in the rate-easing cycle, gold is trading strongly. Furthermore, investors are turning to precious metals for stability due to increased market volatility from elevated geopolitical tensions.

In November 2024, the central bank increased its gold reserves by 53 tons, indicating continued strong purchases. The Reserve Bank of India resumed its 2024 purchasing spree, increasing 8 tons of its gold reserves in November.

Precious metals are trying to form a base and rebound as US data showed a slowing economy and a “timid” reacceleration in inflation. This week is critical for gold traders, who will closely monitor key economic data.

US President Joe Biden reportedly discussed contingency plans for striking Iran’s nuclear facilities if Tehran made significant progress toward developing a nuclear bomb before Donald Trump’s inauguration on January 20.

In 2024, gold prices climbed by 27%, marking the best annual performance since 2010. This surge has been spurred by central bank purchases, increased geopolitical concerns, and major central banks’ monetary easing programs.

The Federal Reserve, as expected, lowered its benchmark policy rate for the third time since September and signalled that rate reduction would halt, causing a sell-off in the precious metals market.

The US economic calendar includes the release of housing market data—Building Permits and Housing Starts today. The attention, however, will remain on the key FOMC monetary policy decision.

In anticipation of a 25-bps rate cut on Wednesday, gold and silver investors await the Fed’s interest rate decision and economic forecasts.