Gold prices have performed exceptionally well in 2024, with an increase of over 25% since the beginning of the year. Its performance was so outstanding that it reached a historic high of $2790 per ounce in late October.

Since then, due to the hawkish stance of the Federal Reserve, the price of this precious metal has fallen back. Because the hawkish stance is more favorable to the US dollar and interest bearing assets such as US treasury bond bonds, some of the previous gains of gold have been erased. Last week, the price of gold fell to a one month low of $2583, and as of the time of writing this article, it has rebounded to around $2641.

While investors wait for new catalytic factors, gold may trade within a certain range. On the daily chart, the 20 day and 50 day moving averages intersect at $2640.

The hawkish stance of the Federal Reserve puts pressure on gold, which is good for the yield of US dollars and treasury bond bonds

About two weeks ago, the Federal Reserve held a cautious attitude towards further interest rate cuts in 2025 at its last policy meeting of the year. After announcing a 25 basis point interest rate cut, Powell said, "We acted quite quickly before reaching our current state, and I think we will obviously slow down in the future

During the interest rate cut cycle, the Federal Reserve has cumulatively lowered its policy rate by a full percentage point, to the level reached in December 2022. In addition to the increasing demand for hedging and the purchasing behavior of central banks around the world, the lower interest rate environment has supported the price of gold by reducing the opportunity cost of holding such interest free assets.

However, the market is currently digesting the hawkish stance of the Federal Reserve, and some analysts predict that there will be two 25 basis point interest rate cuts each in 2025. After the monetary policy meeting, the yield of treasury bond further rose, putting pressure on this interest free gold.

On Thursday, the benchmark 10-year US treasury bond bond yield climbed to a seven month high of 4.59%. In the new week, as of the publication of this article, it is still close to this one month high of 4.53%.

It is worth noting that the rise in the yield of treasury bond boosted the US dollar, which rose nearly for the fifth consecutive week. On Thursday, the US dollar index, which tracks the performance of the US dollar against six major currencies, traded near a two-year high of 108.83.

On the weekly chart, a "golden cross" phenomenon can be observed, where the short-term 20 day exponential moving average crosses the medium-term 50 day exponential moving average upwards. This bullish trend indicates that the US dollar will further rise, which will put greater pressure on the price of gold.

However, although this upward trend will continue, its intensity may weaken in the short term. The schedule of the financial market is relatively easy during Christmas.

In addition, concerns about the hawkish stance of the Federal Reserve have eased, which may cause the US dollar index to enter a consolidation phase, with 109 being a noteworthy resistance level. This in turn will curb the decline in gold prices, as bulls will strive to defend the support zone of $2600.

Analysis of Gold Price Trends

The daily chart shows that the price of gold has been fluctuating within a narrow range in the past few weeks. Its price has slightly fallen below the 50 day and 25 day moving averages of the index. Gold has formed a symmetrical triangular shape, and this shape is approaching its convergence point.

Due to this pattern appearing after a strong upward trend, it is possible that it is a bullish flag pattern, which will further increase gold prices in 2025. If so, the price of gold will rebound and break through its historical high of $2800 per ounce.