On Monday, the dollar index showed a slightly lower performance, closing down by 0.082% at 106.85, after starting the day with an uptick and subsequently fluctuating within a narrow rangeIn conjunction with this movement, U.STreasury yields continued their upward trajectory, with the two-year yield settling at 4.264%, and the ten-year yield at 4.405%. Meanwhile, the performance of U.Sstock markets displayed a mixed outcome; the Dow Jones dipped by 0.25%, while the S&P 500 and NASDAQ indices managed to post gains of 0.38% and 1.2%, respectively.

One of the major factors contributing to the rise in gold prices is the persistent geopolitical riskThe escalating tensions between Israel and Syria—particularly Israel's decision to increase its population in the Golan Heights alongside its ongoing bombardment of the Gaza Strip—has added to market uncertainty

In environments laden with geopolitical tension, investors often gravitate towards safe-haven assets, resulting in heightened demand for gold, which is traditionally viewed as a secure investment.

The persistent geopolitical risks have evidently aided in supporting gold pricesFurthermore, as the largest consumer of gold in the world, major Asian countries have once again resumed their gold purchases, further bolstering demand for this precious metalAnalysts anticipate that enhanced policy stimulus measures may soon be enacted to revitalize economic growth, which would add an additional layer of support for gold prices.

Expectations surrounding a potential interest rate cut by the U.SFederal Reserve have also played a role in shaping gold pricesAnalysts speculate that the Fed will lower rates by 25 basis points in its upcoming meeting and provide an updated economic outlook for 2025. According to the CME's FedWatch tool, there is near certainty, at approximately 97%, that a rate cut will occur

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Such an interest rate decrease typically leads to a depreciation of the U.Sdollar, subsequently making gold—a commodity priced in dollars—more affordable for holders of other currencies, thus creating upward potential for gold prices.

On Monday, after reaching a peak of 107.16, the dollar index reversed its courseThis retreat effectively enhanced gold's appeal on the international stageThe performance of the dollar is intricately linked to Federal Reserve policy and economic indicators; thus, the market's anticipatory stance on potential rate cuts could weaken the dollar, which in turn supports gold.

The recent contraction in U.Smanufacturing activity has also influenced the gold marketAccording to S&P Global's data, the preliminary December manufacturing PMI fell to 48.3, undershooting economic forecasts and indicating further shrinkage in manufacturing

This contraction reflects a deceleration in economic growth, which may compel the Fed to adopt a more accommodative monetary policy to aid in economic recoveryMoreover, the factory output index has dropped to its lowest level since May 2020, indicative of the pressures facing the economy.

Although the service sector's PMI showed signs of recovery, achieving a new peak not seen in 38 months, the overall economic data remains lacklusterThis may lead investors to adopt a cautious perspective toward future economic prospects, further bolstering demand for gold.

Current market sentiments appear to be relatively cautious as investors await the results of the Fed's policy meetingAlthough gold prices have seen some upward movement due to geopolitical risk factors and rate cut expectations, profit-taking behavior has limited these increases

Investors are particularly focused on the forthcoming release of U.Sretail sales and industrial output data for November, with optimistic expectations that could impose some pressure on gold prices.

Additionally, recent statements concerning U.Strade policies have garnered market attentionAnnouncements regarding a proposed 25% tariff on all products from Mexico and Canada, alongside an extra 10% tariff on imports from Asia, may significantly impact the global trade environment and, in turn, influence the performance of financial markets.

In summary, gold maintains a bullish outlook amid current conditions, with investors likely to be patient and wait for a stabilization in gold prices before deciding to enter or increase their positions.

In the oil markets, the balance between supply and demand remains a critical determinant of oil prices

Recent focus has shifted to potential further sanctions on Russia and Iran, which could lead to a tightening in global oil supplyHowever, as the market begins to digest these implications, the momentum to support oil prices has started to wane.

Moreover, preliminary surveys indicate anticipated declines in U.Scrude oil and distillate inventories, alongside a potential rise in gasoline inventoriesThese variations in inventory data could alter market expectations regarding future supply and demandThe American Petroleum Institute (API) and the U.SEnergy Information Administration (EIA) are set to release their latest inventory reports this week, with the market keenly monitoring these developments.

Geopolitical factors continue to exert significant influence over crude oil pricesRecently, Germany's Chancellor Scholz faced difficulties in securing parliamentary approval, creating an air of political uncertainty within Germany

Such political turbulence may have repercussions for the EU's energy policy and could, in turn, destabilize the oil market.

In the Middle East, the ongoing conflict between Israel and Hamas is escalating, presenting potential implications for the global energy supply chainAlthough direct impacts on oil supply remain elusive for now, the market’s sensitivity to geopolitical risk persists, with the potential for sudden developments to trigger oil price volatility.

Economic data is crucial in shaping expectations regarding oil demandRecent consumer spending figures from key Asian economies fell short of expectations, suggesting that the outlook for economic recovery continues to encounter headwindsSuch data releases are prompting a more cautious sentiment regarding oil demand, consequently applying downward pressure on oil prices.

At the same time, anticipation surrounds the Fed's expected 25 basis point rate cut in the upcoming meeting, underscoring a measured approach to future easing policies

The market broadly expects the Fed's decisions to heavily influence the dollar's exchange rate, subsequently affecting oil prices denominated in dollarsTypically, a stronger dollar will exert downward pressure on oil prices, causing investors to maintain a vigilant watch on forthcoming Fed announcements.

As the Fed’s interest rate resolution approaches, market sentiment remains cautiousIn the meantime, investors are opting for profit-taking strategies, contributing to a slight retreat in oil pricesAccording to the CME’s "FedWatch," there is a remarkable 95.4% chance that the Fed will cut rates in their upcoming meetingShould the Fed act in accordance with expectations, it could stimulate economic recovery, potentially boosting oil demand.

Nonetheless, the market must remain attuned to the policy moves made by other central banks