PRECIOUS-Gold steadies in holiday lull as markets await 2025 Fed moves

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Gold headed for best year since 2010

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Base case projects gold prices around $2800/oz in 2025 - analyst

(Updates with midsession trading)

By Sherin Elizabeth Varghese

Dec 24 (Reuters) - Gold prices steadied in holiday-thinned trade on Tuesday as investors looked ahead to the U.S. Federal Reserve's interest rate strategy and President-elect Donald Trump's tariff policies that could shape the metal's trajectory next year.

Spot gold was little changed at $2,611.73 per ounce, as of 11:00 a.m. ET (1600 GMT). U.S. gold futures were steady at $2,626.40.

"The current sideways trend appears to be primarily driven by the low liquidity environment," said Zain Vawda, market analyst at MarketPulse by OANDA.

Gold had a stellar year in 2024, poised for its best performance since 2010 with a 27% gain.

"A similar rally could occur in 2025, but this will largely hinge on geopolitical developments," Vawda added. "Without unexpected geopolitical disruptions, the base case projects gold prices around $2,800/oz, driven by persistent risks and trade war concerns."

Bullion is considered a safe investment during economic and geopolitical turmoil.

Analysts had predicted that successive record highs in 2024 would set the stage for a similar rally in 2025, fueled by sustained central bank buying, rising geopolitical tensions, and Fed rate cuts.

However, the momentum began to wane in early November as the dollar strengthened amid "Trump euphoria", denting gold's rally.

With Trump set to return to the White House in January, U.S. investors are bracing for significant policy shifts in 2025, including higher trade tariffs, deregulation, and tax changes, all of which could have inflationary implications.

"If (tariffs are) borne out, this would give less room for the U.S. Fed to continue cutting interest rates, and we've seen the market already scaling back expectations on that front for 2025," said Frank Watson, precious metals analyst at Kinesis Money.

While the Fed aggressively cut rates in September, November, and December, it has signaled fewer cuts in 2025 due to stubbornly high inflation.

Higher rates increase the opportunity cost of holding non-yielding bullion.

Spot silver lost 0.3% to $29.55 per ounce, platinum fell 0.2% to $937.35, while palladium gained 1.4% to $942.55.

(Reporting by Sherin Elizabeth Varghese and Anushree Mukherjee in Bengaluru; Editing by Christina Fincher and Barbara Lewis)