- Gold rallied by 1% last week, tracking the weakness in the US dollar.
- Fed’s balance sheet expansion could keep gold better bid.
Gold is lacking a clear directional bias in Asia, having eked out its biggest weekly gain in nearly three months.
The yellow metal is currently trading at $1,474 per Oz, representing little or no change on the day.
Gold ended last week with a 1.07% gain – the biggest rise since the final week of September. Back then, the metal had rallied by 1.89%.
Dovish Fed
The US Federal Reserve (Fed) on Dec. 11 kept rates steady at 1.5-1.75% and signaled a rate cut pause for 2020. Powell, however, cited persistent high inflation as a prerequisite for interest rate hikes, sending the US dollar lower across the board.
The dollar index, which tracks the value of the greenback against majors, declined by 0.51% last week, having shed 0.60% in the previous week.
The weakness in the US dollar helped gold print a 1% gain despite the US-China phase one trade deal and Brexit optimism.
Fed’s balance sheet expansion
The Fed is set to bloat its balance sheet further, having expanded it more than $300 billion since mid-September.
The central bank is planning to offer a total of $490 billion in liquidity via repo operations for the turn of the year, including the $75 billion that it has already pumped in through three earlier term actions, according to Bloomberg.
As a result, the balance sheet is seen expanding to $4.5 trillion next month from the current $4.1 trillion.
Historically, gold has cheered the Fed’s balance sheet expansion.
Gold technical levels
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