On Tuesday (December 17th) morning trading in the Asian market, spot gold fluctuated narrowly and is currently trading around $2652.01 per ounce. Gold prices bottomed out and rebounded on Monday, hitting a new low of $2643.41 per ounce at the beginning of the session and closing at around $2652.50 per ounce. Supported by ongoing geopolitical concerns and a weakening US dollar, the market is still waiting for the Federal Reserve's policy meeting, with a strong wait-and-see sentiment and cautious trading overall; It is expected that the Federal Reserve will cut interest rates for the third time and provide clues about the outlook for 2025.

Nitesh Shah, a commodity strategist at WisdomTree, said, 'I believe that the continued presence of geopolitical risks is one of the reasons for the strength of gold.'.

In addition, "China has resumed gold purchases. Therefore, gold is responding to many of these things," Shah pointed out, adding that the largest consumer country, China, may increase policy stimulus to revive its economy, which will further support gold.

In terms of geopolitics, Israel agreed on Sunday to double its population in the Golan Heights, citing that despite the moderate tone of the rebel leader who overthrew President Assad a week ago, Syria remains a threat.

According to the official Palestinian news agency, on the 16th local time, Israeli warplanes bombed a house in northern Gaza Strip's Batrachia, causing 5 deaths and multiple injuries.

On the 16th local time, the Russian Ministry of Defense reported that the Russian military had taken control of one settlement in the past day and launched attacks on targets such as Ukrainian ammunition depots, electronic warfare base stations, and military airport infrastructure.

On the 16th, the General Staff of the Ukrainian Armed Forces issued a war report stating that the Ukrainian army had engaged in over 200 battles with the Russian army on the front lines in the past day.

In terms of economic data, manufacturing activity in the United States further contracted in December, with a measure of factory output dropping to its lowest level in over four and a half years, due to concerns that raising tariffs will raise the prices of imported raw materials next year.

S&P Global announced on Monday that the initial manufacturing PMI for this month has dropped from 49.7 in November to 48.3. Economists surveyed by Reuters previously predicted that the initial value of the index would be 49.8. A PMI below 50 indicates a contraction in the manufacturing industry, which accounts for 10.3% of the total economy.

The factory output index dropped from 47.9 in November to 46.0, the lowest level since May 2020.

US President elect Trump has announced that he will impose a 25% tariff on all products from Mexico and Canada, and an additional 10% tariff on goods from major Asian countries. These three countries are the main trading partners of the United States.

However, the joyous sentiment towards the results of the presidential election on November 5th pushed the initial value of the service sector PMI from 56.1 in November to 58.5, reaching a new high in 38 months. This has caused the composite PMI output index tracking the manufacturing and service industries to rise from 54.9 in November to 56.6 this month, the highest level since March 2022.

The measurement index for new orders received by factories in the survey decreased from 49.3 in November to 47.6. The supplier's delivery time has been slightly extended due to a shortage of labor.

The indicator for measuring manufacturers' payment of input prices has risen to 59.1, the highest level since November 2022, when it was 52.3.

The US dollar index rose and fell on Monday, hitting 107.16 at one point during trading, approaching last week's nearly three week high of 107.18 and closing at 106.85, a decrease of about 0.08%. This makes gold priced in US dollars more affordable for holders of other currencies.

The Federal Reserve is expected to cut interest rates by 25 basis points during its two-day meeting starting on Tuesday, while updating its outlook for 2025 and beyond.

According to CME's FedWatch tool, the market believes that the likelihood of the Federal Reserve cutting interest rates by a quarter of a percentage point at the end of Wednesday's policy meeting is close to 97%.

The yield on the US 10-year treasury bond bond fell slightly by 0.8 basis points on Monday to 4.391%.

The US dollar has always been influenced by headline news, not only about what actions the Federal Reserve will take, but also whether it will be seen as a hawkish interest rate cut, "said Juan Perez, head of trading at Monex USA." We believe they will cut rates, while also emphasizing that the economy and inflation are still part of the overall situation, and they may have to slow down the pace of rate cuts

Tim Horan, Chief Investment Officer of Chilton Trust Fixed Income, said, "I absolutely agree with the idea of the Federal Reserve holding its fire and first looking at how fiscal policy is doing and how the budget is being formulated. There may be a rate cut in March, or even in the first half of the year.

He added that if the average of the dot plot shows three interest rate cuts, it could be in March and June, another one could be in September, or it could have to wait until December; However, this policy adjustment to restore neutrality can take various forms, depending on the situation of rising risks and the uncertainty of fiscal policy.

A survey shows that the decline in business activity in the eurozone has eased this month, and European Central Bank President Lagarde said on Monday that if inflation continues to slow towards the 2% target, the ECB will further cut interest rates.

When you examine the performance of the US dollar, not only do you see that the Federal Reserve is in an awkward position, but you also see that many major central banks have their own stories in another direction: the Bank of Canada just cut interest rates, the Swiss National Bank cut interest rates, and the European Central Bank cut interest rates beyond expectations. Ultimately, there are not many factors that can reverse the current strength of the US dollar

In addition, investors also need to pay attention to the linkage reaction triggered by the prospect of Trump's related policies.

The Canadian government proposed on Monday to allocate 1.3 billion Canadian dollars (approximately 913.05 million US dollars) for border security, following President elect Trump's threat to impose tariffs unless Canada reduces immigration and drug flows into the United States.

On this trading day, the US November retail sales monthly rate (commonly known as the "terror data") and US November industrial output monthly rate will also be released. The market expectation is relatively optimistic, which may suppress the trend of gold prices, and investors need to pay attention.