(Kitco News) - Gold traders and investors are eagerly awaiting the next move as the precious metal attempts to break the crucial $2,000 an ounce level. The Federal Reserve's decision to maintain interest rates and continue restrictive monetary policies has contributed to market volatility, prompting analysts to closely monitor the potential impact on gold prices.

According to the CME FedWatch Tool, there is a near 100% chance that the Federal Reserve will keep interest rates unchanged between 5.25% and 5.50%. This decision aligns with expectations of an extended period of restrictive monetary policies. Ole Hansen, Head of Commodity Strategy at Saxo Bank, highlights that the Federal Reserve's hawkish stance has discouraged investors from purchasing gold-backed exchange-traded products, a crucial market segment for supporting current price levels.

Hansen emphasizes that the breakthrough of the $2,000 an ounce barrier is essential for sustaining gold's rally. Failure to do so may lead to profit-taking and price consolidation in the coming week. On the technical side, gold continues to trade within a steep ascending channel, suggesting both strength in the ongoing rally and the need for consolidation. A close above $2,000 could signal a potential move towards the record closing highs of around $2,050 seen in March 2022 and May of this year.

However, analysts caution that the situation could change if the Federal Reserve adjusts its stance in response to rising bond yields. Despite this uncertainty, geopolitical tensions and concerns about global debt continue to support safe-haven demand for gold in the near term, mitigating some of the Federal Reserve's influence.

As the week concludes, gold prices appear to be holding steady, retaining most of the gains made over the past two weeks. December gold futures are currently trading at $1,990 per ounce, down merely $4 from last week's closing price.

Julia Cordova, founder of Cordovatrades.com, suggests that a consolidation phase for gold prices may be imminent if the metal fails to break above $2,000 per ounce. The ability of gold to sustain recent gains is underpinned by the 10-year bond yields, which remain close to 5%, and the U.S. dollar index, which maintains solid support above 106 points.

Geopolitical instability, exemplified by the ongoing conflict between Israel and Hamas, remains a significant driving force for gold. The prospect of Israel's Defense Force intervening in Gaza adds further uncertainty, potentially escalating tensions and drawing involvement from third parties such as Hezbollah and Iran. Against this backdrop, gold prices continue to rise as anxious investors seek refuge in the ultimate safe-haven asset.

Analysts also highlight the growing threat of an impending U.S. debt crisis, which could affect gold prices. As investors anticipate potentially unanchored bond yields due to the nation's rising deficit, combined with 10-year bond yields at 5%, pressure mounts on U.S. credit markets, stifling growth.

Edward Moya, Senior North America Market Analyst at OANDA, urges caution as investors remain sensitive to the U.S. Treasury Department's quarterly refunding statement, scheduled for next week. Concerns revolve around the increased issuance of bonds in the fourth quarter and the demand that will accompany this surge. Any major problems in the bond market resulting from this influx of supply could have a positive impact on gold, as investors seek a safe-haven asset.

While all eyes will be on the Federal Reserve's rate decision next week, market participants will also closely monitor the monetary policy decisions of the Bank of England and the Bank of Japan. Additionally, the release of October's nonfarm payrolls report will offer crucial insights into the state of the U.S. labor market, further shaping market sentiment.

As traders brace for potential market fluctuations, gold's ability to breach the $2,000 milestone remains a key focus. The Federal Reserve's monetary policies, geopolitical uncertainties, and concerns about the U.S. debt crisis all contribute to the delicate balancing act that influences the precious metal's price trajectory.