As global traders focused their attention on the impending results of the Federal Reserve's final policy meeting of the year, the US dollar index remained stable, closing up by 0.088% at 106.95. In the bond market, Treasury yields fluctuated slightly, reaching a one-month high during the trading session, with the two-year notes settling at 4.266% and the ten-year notes at 4.403%. Conversely, the Dow Jones Industrial Average plummeted by 0.6%, marking its ninth consecutive day of losses, the longest stretch since February 1978. Meanwhile, the S&P 500 index and the Nasdaq also fell by 0.39% and 0.3% respectively.

One cannot overlook the pivotal role that the Federal Reserve's monetary policy plays in influencing gold pricesCurrently, many market participants expect a 25 basis point rate cut during the forthcoming meeting, which would mark the third reduction since September

Nevertheless, stronger-than-expected US retail sales data for November, which showed a month-on-month growth of 0.7%, exceeding the anticipated 0.5%, has fueled concerns that the Fed might lean towards a more hawkish stanceAccording to CME’s FedWatch tool, there is a 95% probability of a 25 basis point cut this week, while the likelihood of a rate cut in January stands at a mere 16%. This disparity indicates a division in market sentiment regarding the pace of future rate cuts by the Fed.

Market analysts speculate that in the latest summary of economic forecasts to be released on Wednesday, the Fed may hint at fewer rate cuts in 2025. The steadfastness of economic indicators, particularly the resilience in the labor market and the persistent inflation, suggests the Fed might pause its rate cuts in January, or even adopt a more cautious approach going forward.

The robust growth reflected in the November retail sales data signals a surprising resilience in the US economy, heightening inflation concerns and placing pressure on gold prices

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While rate cut expectations still linger, the strength of recent economic data may compel the Fed to adopt a more measured approach to rate cuts, or potentially pause these reductions altogether.

Geopolitical risks also play a significant role in the fluctuations of gold pricesThe ongoing conflict in the Gaza Strip has continued to capture global attention; although American officials have suggested that a ceasefire agreement is close to being achieved, the underlying uncertainty in geopolitical matters remains palpableSuch unpredictability can stimulate safe-haven buying, consequently supporting gold prices.

Typically, there exists an inverse relationship between the dollar's performance and gold pricesRecently, the slight uptick in the dollar index has made gold more expensive for international holders, thereby exerting additional pressure on gold prices.

In summary, the prevailing trend indicates a gradual strengthening of gold prices

Investors are now keenly observing the support region formed after breaking through the hourly downtrend lineOnce a stabilization occurs post-correction, they aim to engage in long positions on gold.

On the macroeconomic front, recent data has created a ripple effect concerning demand expectations in the crude oil marketNotably, a surprising decline in Germany's December business climate index, reaching its lowest level since May 2020, underscores the impact of industrial downturns and geopolitical uncertainties on Europe's largest economy.

In contrast, the US retail sales data for November showcased unexpectedly robust growth, reinforcing the narrative of an enduringly resilient US economy buoyed by strong consumer spendingThe notable increases in automotive sales and online shopping have emerged as primary drivers, illustrating the vigor of the year-end economy

This robust consumer expenditure is likely to support fuel demand.

The Federal Reserve's upcoming rate decision remains a crucial determinant of oil pricesMarket expectations widely suggest a 25 basis point cut during this week’s meeting, which could lower borrowing costs, thus energizing economic growth and potentially increasing demand for crude oilHowever, uncertainties surrounding the Fed's future rate adjustment rhythm compel investors to adopt a cautious stance before the decision, leading oil prices to oscillate within a foundational trading rangeShould the Fed signal a more dovish outlook along with indications of sustained future rate cuts, this could enhance market expectations surrounding economic growth and oil demand, subsequently driving crude prices higherConversely, a hawkish tone from the Fed may exert downward pressure on oil prices.

Another key aspect influencing oil prices is the latest EIA inventory data

The market anticipates a decrease in US oil inventories, which would alleviate concerns surrounding oversupplyAPI data indicated a drop of 4.69 million barrels in crude stockpiles along with a rise in gasoline and distillate inventoriesThe final EIA data release will directly impact oil pricingIf corroborated by EIA results indicating a significant decline in crude stocks, this could provide essential support for oil prices; contrary, a lack of decline could impose pressure on themAdditionally, a drop in refinery utilization rates points towards a potential weakening in crude demand.

Geopolitical risks persist as a significant factor for the crude oil marketReports of potential large-scale military operations by Israel against Houthi rebels in Yemen contribute to the existing geopolitical instability in the Middle East, which could catalyze rises in oil prices