Last weekend, prominent economists who attended the American Economic Association conference in San Francisco shared their insights regarding the Federal Reserve's upcoming monetary policy decisionsAccording to Ellen Zentner, Chief U.SEconomist at Morgan Stanley, the Fed, led by Chairman Jerome Powell, has signaled a "solid pause" in its monetary policy during its last meetingThe policy statement from the Fed indicated it would examine economic conditions when "considering the degree and timing of any further adjustments." Zentner interprets this as a commitment to notify the public if any significant actions are to be takenHarvard professor and former senior economist in the Obama administration, Jason Furman, added that if the labor market remains healthy, it is plausible that the Fed may only lower interest rates once this yearHe emphasized a shift in the Fed's approach—an attitude that requires "justification" for rate cuts, contrasting with last year’s perspective of an overall permissiveness toward rate cuts

Furman suggested that under stable conditions, considering inflation projections and the optimal interest rate range—which neither stimulates nor suppresses demand—there might be only one 25 basis point cutHowever, an uptick in the unemployment rate could trigger the Fed to adopt a more accommodative stance.

Moreover, on Tuesday, the ISM released data indicating that the U.SServices PMI for December exceeded expectationsThe data demonstrated a rebound in service sector growth and enhanced business activityNotably, a price index hit its highest level since early 2023. The ISM Services PMI stood at 54.1 in December, surpassing the anticipated 53.5 and a prior value of 52.1 in November—where 50 acts as a dividing line between growth and contractionThe PMI quickly reversed the relative lethargy seen in November, where it marked a 3.9-point dip, the first decline since June

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Since the second quarter of last year, the U.Sservices PMI has displayed volatility, with both April and June figures falling into contraction territoryAnalysts suggest that the rising costs reflected in the PMI data are occurring at a time when Fed officials are becoming more cautious regarding interest rate cutsA resurgence in business activity and increased orders indicate robust demand, suggesting that the foundation of the U.Seconomy remains solid as Q4 comes to a close, intensifying concerns that inflation may persist.

Upcoming data to watch includes Germany’s November retail sales month-on-month figures, the Eurozone's December Economic Sentiment Index, the final consumer confidence index for the Eurozone for December, U.SADP employment changes for December, and first-time unemployment claims for the week ending January 4, along with U.Swholesale inventory month-end figures for November.

When it comes to the gold market, recent trends have shown an fluctuation upward

The daily chart indicates that gold ended slightly up, hovering around the price of 2649. Analyzing this movement, we see that short-covering played a vital role, as previously overly bearish investors adjusted their positions and executed significant short-covering purchases, injecting powerful upward momentum into gold pricesAdditionally, ongoing geopolitical tensions create a persistent atmosphere of uncertainty, exacerbated by regional conflicts and sporadic trade frictions that leave global markets on edgeCoupled with unclear domestic policy directions in the U.S., including economic stimulus plans and monetary policy adjustments, numerous uncertainties have sparked deep investor anxiety, leading to a surge in demand for safe-haven assets like gold.

However, gold’s ascent is not without its challengesThe dollar index rebounded strongly, supported by multiple favorable conditions

Impressive performance from U.Seconomic data and a resilient job market have shifted the Fed's signals toward a more hawkish stance, making the dollar increasingly attractiveThis robust dollar acts like a formidable barrier for gold, significantly constraining its potential for price recoveryAs traders look toward today’s trading, the focus rests on the significant resistance level around 2670. A successful breakthrough here could catapult gold to new heights, while support near 2630 is equally crucial; a breach could herald a fresh wave of downward pressure on prices.

Turning to the Australian dollar, we witnessed a downward trend yesterday, with the daily close showing a small decline as the currency traded around 0.6230. Besides profit-taking exerting pressure on the Australian dollar, the dollar index’s rebound—fueled by expectations for a Fed rate cut and positive economic data—also contributed significantly to this decline