Gold prices, poised to close 2024 with an extraordinary 27% annual gain—the strongest performance since 2010—are showing signs of cooling off in the year’s final trading days. The metal’s rally has been driven by robust central bank purchases, geopolitical tensions, and accommodative monetary policies from major global banks.
Despite this strong performance, gold faces headwinds from market speculation that the Federal Reserve (Fed) may scale back its rate-cutting plans for 2025. Persistent inflation and a resilient U.S. labor market have prompted the Fed to adopt a more hawkish stance, tempering gold’s appeal in recent weeks.
Safe-Haven Appeal Amid Global Tensions
Gold continues to draw support as a safe-haven asset amid escalating geopolitical risks. The ongoing Russia-Ukraine conflict and unrest in the Middle East have heightened risk aversion, keeping demand steady for the yellow metal. Recent developments, including warnings from Israel to Yemen’s Houthi militants and thwarted assassination attempts in Moscow by Ukrainian intelligence, underscore the fragile geopolitical landscape.
As the Trump administration prepares to take office, uncertainty surrounding trade policies and potential tariffs could reignite trade disputes, further bolstering gold’s safe-haven status.
U.S. Treasury Yields and Dollar Influence
The U.S. Dollar Index (DXY) remains subdued near 108.00 as investors process the Fed’s hawkish pivot. Simultaneously, falling U.S. Treasury yields—down 2% for both 2-year and 10-year notes—have offered limited support for gold, as lower yields reduce the opportunity cost of holding the non-yielding asset.
Technical Outlook: Gold in Consolidation Mode
Gold is trading near $2,610.00 per troy ounce, consolidating below its nine-day and 14-day Exponential Moving Averages (EMAs). The 14-day Relative Strength Index (RSI) indicates a neutral sentiment, hovering just below the 50 level.
Key support levels include the monthly low of $2,583.39, while immediate resistance lies at the nine-day EMA of $2,618.00 and the 14-day EMA of $2,624.00. A decisive break above these levels could propel gold toward the psychological barrier of $2,700.00, with $2,726.34 as a longer-term target.
Market Focus on Fed and Trump Administration
Heading into 2025, gold’s trajectory will likely hinge on the Fed’s interest rate policy and the economic strategies of the incoming Trump administration. While fewer rate cuts could limit upside momentum, geopolitical uncertainty and potential trade conflicts may sustain gold’s safe-haven demand.
