XAU/USD drifts higher to $2,020 amid Middle East tension

• Gold price gains ground near $2,025 amid the ongoing tension in the Middle East.
• The US Core PCE gauge registered its lowest level since March 2021, coming in at 2.9% YoY in December vs. 3.2% prior.
• The rising tension in the Middle East might boost the price of gold, a traditional safe-haven asset.
• Traders will closely monitor the Federal Open Market Committee (FOMC) meeting on Wednesday.

Gold price snaps the two-week losing streak during the early Asian session on Monday. The escalating tension in the Middle East boosts the safe-haven demand, which lifts the yellow metal. The spotlight this week will be the Federal Open Market Committee (FOMC) meeting on Wednesday, which is expected to keep rates at 5.25–5.50%. At press time, the gold price is trading at $2,025, gaining 0.33% on the day.

The Personal Consumption Expenditures Price Index (PCE) came in at 0.2% MoM and 2.6% YoY in December, according to Commerce Department data released Friday. The core PCE figure, excluding energy and food, rose 2.9% annually, a slower pace than the 3.2% rate seen in November. The core PCE gauge registered its lowest level since March 2021.

The markets anticipate the Federal Reserve (Fed) to keep rates steady at 5.25–5.50% at its January meeting on Wednesday. Traders will take more cues from the press conference. If Fed Chairman Jerome Powell signals a possible rate cut in March, this could exert some selling pressure on the Greenback.

Three US troops were killed and dozens injured after an unmanned aerial drone attack on US forces stationed in northeastern Jordan near the Syrian border, US officials said on Sunday. The rising tension in the Middle East might boost a safe-haven asset like gold.

Looking ahead, the FOMC meeting on Wednesday will be the highlight of this week ahead of the Bank of England (BoE) interest rate decision on Thursday. These events could give a clear direction to the gold price.