Gold prices (XAU/USD) traded flat around $2,650 during the early Asian session on Monday (12/16). However, strong central bank purchases and ongoing geopolitical tensions in the Middle East could support the precious metal in the near term. Investors await the December US Purchasing Managers' Index (PMI) for fresh impetus, due on Monday.

Significant demand from central banks lifted the yellow metal. Central banks have been net buyers of gold for nearly 15 years, underscoring its value as a crisis hedge and reliable reserve asset. According to the World Gold Council, the precious metal is expected to appreciate slightly by 2025 due to central bank actions, geopolitical tensions and economic conditions in key markets such as the US, China and India.

On Sunday, the Israeli government approved a plan to double its population in the occupied Golan Heights, citing threats from Syria, according to Reuters. Signs of rising geopolitical tensions in the region could trigger a flight to safety, which would benefit Gold prices. On the other hand, US President-elect Donald Trump's tariff plans would further fuel inflation and delay the Federal Reserve's (Fed) easing policy. Moreover, a strong US economy could lift the US Dollar (USD) and weaken USD-denominated commodity prices as it increases the opportunity cost of holding non-yielding bullion. "Overall, we see a stronger US economy next year, which should leave less room for rate cuts and thus dampen optimism towards gold," said Carsten Menke, an analyst at Julius Baer.

Gold traders will be watching the Fed meeting on Wednesday, which is anticipated to cut interest rates by 25 basis points (bps). Attention will be on Chairman Jerome Powell's speech, as it could provide some clues on US monetary policy for 2025.

Source: FXStreet