Gold (XAU/USD) prices held steady near $2,625 during the early Asian session on Monday. The Federal Reserve's (Fed) hawkish stance may weigh on the yellow metal.

However, a weaker greenback after a softer inflation report could limit its decline.

The Fed cut interest rates in its December meeting as expected but signaled it would slow the pace of borrowing cost cuts further.

The Fed's dot plot, a chart that projects the future path of interest rates, indicated a half percentage point rate cut in 2025, compared to a full percentage point cut projected in September.

This, in turn, continued to boost the US Dollar (USD) and undermined the USD-denominated Gold as higher real interest rates increased the opportunity cost of gold.

On the other hand, weaker-than-expected US inflation data could help limit losses for the precious metal. US inflation, as measured by the Personal Consumption Expenditures (PCE) Price Index, rose to 2.4% YoY in November from 2.3% in October. The reading was below market consensus of 2.5%.

Meanwhile, Core PCE jumped 2.8% in November, compared to 2.8% in the previous reading, but below the 2.9% estimate.

The increase in Gold demand in China may have contributed to the rally in the yellow metal as China is the world's largest Gold consumer.

With less than 6 weeks to go until the Chinese New Year, the world's heaviest gold-buying festival surpasses Diwali in India. Moreover, the ongoing geopolitical tensions in the Middle East could boost safe-haven flows, benefiting Gold prices.

Source: FXStreet