Gold rose despite more aggressive policies of the Federal Reserve. It traded $ 40 higher since Wednesday, but what comes next, analysts say, will be critical.
Many were surprised that there was a rally in the market after the Fed announced that tapering will be sped up. Three rate hikes are also planned for 2022.
With this, the market could go into safe-haven mode, as many remain unsure if the Fed could raise interest rates three times next year.
Everett Millman, an expert on precious metals, even said there is skepticism on whether the Fed could cope, so three-fold rate hikes are very unlikely. There is a huge chance that the Fed will not live up to expectations.
That is a classic scenario for the Fed, trying to use rhetoric and public communication to influence market behavior without changing monetary policy. That is why it is not a surprise that gold rose, not trusting the Fed's plans.
There is also a risk next year that the Fed will move away from its hawkishness and announce reasons why it will keep the stimulus or not raise interest rates.
After all, there is growing concern on how strong the economic recovery will be next year due to the Omicron and potential rate hikes.
Edward Moya, another expert on precious metals, said December is one of the most difficult months to trade. And given the extremely low volatility, gold prices could rise sharply starting this week.
But he is neutral towards the metal for the coming week due to weak market conditions.
Meanwhile, Millman warned of a potential trap for gold this week, citing timing. He is optimistic in early January though, despite gold possibly remaining between $ 1850 and $ 1750.
Watch out for US Q3 GDP, PCE price index and durable goods orders this week.
