On Monday, the U.Sgovernment managed to avert a shutdown crisis, causing the dollar index to maintain its position near a two-year high, finally closing up by 0.24% at 108.08. In the bond market, yields surged across the board, with the two-year Treasury yield closing at 4.342% and the ten-year yield at 4.593%. The major U.Sstock indices all recorded gains, with the Dow Jones increasing by 0.16%, the S&P 500 up by 0.7%, and the Nasdaq rising by 0.98%.

The dollar index rose by 0.4%, hovering around its two-year peak, which significantly impacted gold prices negativelyA stronger dollar diminishes the allure of gold for holders of other currencies, effectively stifling demandAdditionally, the yield on ten-year U.STreasuries hit a six-month high, further amplifying the downward pressure on goldThis trend can be attributed primarily to market expectations of U.S

economic resilience and their interpretation of the Federal Reserve's future monetary policies.

Despite the Fed's recent decision to cut interest rates by 25 basis points, signals pointing to a reduced number of future cuts alongside a slew of robust economic data have strengthened market confidence in the U.SeconomyFor instance, significant increases in November's core durable goods orders and a rebound in new home sales bolster the narrative of sustained economic growth, leading to heightened interest rate expectationsThe prevailing market sentiment suggests an ongoing reassessment of the Federal Reserve's recent meeting outcomes and the anticipated rate path into 2025, with a potential pause on further rate cuts expected as early as January or March.

Supporting the dollar was a series of strong economic indicators, reinforcing the bearish outlook for gold

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The notable growth in core durable goods orders reflected robust business investments, while new home sales bounced back after disruptions due to extreme weather, further illustrating the underlying resilience of the U.Seconomy as the year wraps upThese data points not only back the Fed's predictions for fewer rate cuts but also boost confidence in economic robustness.

However, not all economic indicators painted a rosy pictureThe consumer confidence index saw a decline in December, attributed partly to worries that tariffs might push living costs higherPlans for imposing or significantly raising tariffs on imported goods could potentially hinder economic growth dynamics next year, escalating economic uncertaintyAlthough such uncertainty could traditionally support gold prices, its effect is currently overshadowed by the strength of the dollar and rising rate expectations.

It is noteworthy that despite the downturn in consumer confidence, optimism regarding the labor market remains intact, indicating that consumer spending may still have a solid foundation

Strong consumer spending has historically acted as a crucial driving force behind U.Seconomic growth, aligning with the Fed's assessments of economic robustness.

Geopolitical risks continue to loom; however, their influence on gold prices appears muted at this junctureTypically, heightened geopolitical tensions elevate demand for safe-haven assets like goldNonetheless, the current strong dollar and interest rate expectations are capping this flight to safety.

In light of these developments, gold finds itself in a policy slowdown period, although the technical indicators present favorable momentum for bullish positions in the short termTraders are advised to monitor support levels on the hourly upward trend line as any stabilization could signal a buying opportunity.

Turning to crude oil, Middle Eastern geopolitical risks have remained a significant factor shaping the oil market

Any escalation in military actions or regional conflict could disrupt oil supplies and consequently elevate pricesHowever, the market currently exhibits low trading volumes, which limits the immediate impact of these geopolitical tensions.

With the dollar index remaining high, this poses unfavorable conditions for dollar-denominated crude oil pricesA strong dollar tends to suppress demand for oil, leading to price declinesInvestors need to keep a close watch on movements in the dollar index to ascertain if it will continue to reach new heights, which could further pressure oil prices.

In December, a surprise decline in the U.Sconsumer confidence index raised concerns that the economy might be experiencing some level of slowdownA drop in consumer confidence could influence oil demand negatively, though the extent of this impact remains ambiguous amid contradictory economic data.

The recent interest rate cut by the Bank of Canada reflects the global trend of economic deceleration, potentially suppressing oil demand

Nevertheless, the Bank's Governor indicated that future cuts would proceed incrementally, highlighting that confidence in the economy is not entirely lost.

Analysts estimate a staggering 91.4% probability that the Federal Reserve will maintain rates in January, indicating a low chance of further cutsThis suggests ongoing concerns regarding inflation, signaling a possible tightening of future monetary policyA restrictive monetary policy environment generally deterred increases in commodity prices, including crude oil.

Upcoming EIA inventory data, scheduled for release this Thursday, will be pivotal in affecting short-term oil price trajectoriesThe market currently holds divided expectations regarding inventory levels, hinting at potential price fluctuationsGiven the holiday season’s typically sparse trading activities, unexpected inventory data may significantly amplify market reactions.

Beyond Middle Eastern tensions, other geopolitical factors may sway the oil market