Will Gold Extend Rally Into 2025?
LONDON (December 31) Gold prices slipped yesterday as a stronger US Dollar, anticipation of a hawkish Fed and thin liquidity all contributed. Uncertainties around tariffs and challenges in 2025 are keeping the precious metals appeal going for now and capping further losses.
Gold prices are on track to end the year with a remarkable 27% increase, marking their best yearly performance since 2010.
Currency Strength Chart: Strongest – Weakest – JPY, GBP, EUR, AUD, CHF, USD, NZD, CAD –
Source: FinancialJuice
2025 Outlook For Gold
Looking at the year ahead and 2025 and it will no doubt be interesting. Geopolitical risk remains a threat with the Middle East still on edge and the Russia-Ukraine situation no closer to a resolution. Just yesterday there were rumors that a proposal by the incoming Trump administration to delay Ukraine joining NATO by 10 years will not be accepted by the Kremlin.
Anyone with knowledge of the situation there will know that this will not change as the main reason for the conflict (at least from a Russian perspective) is Ukraine joining NATO. These developments are likely to keep some geopolitical risk premium in play and keep safe-haven demand going.
Global Central Banks were one of the main drivers of the Gold price rise in 2024. This is expected to continue in 2025. The World Gold Council survey revealed in the second half of 2024 that Central Banks are likely to purchase more Gold in the next 12 months. This should further bolster demand for the precious metal.
When it comes to risks affecting Gold prices moving forward, it does get challenging. The reason for this is the incoming Trump administration is expected to do good things for the economy but some policies could lead to higher interest rates. This could weigh on Gold prices.
This is a double-edged sword, however, in that the increased risk of uncertainty from Trump policy and concern around the impact of tariffs could actually bolster the demand for safe-haven assets and thus Gold.
All in all, analysts are largely pricing in further gains for the precious metal in 2025, personally, I do see the potential for upside as well. However, I would not rule out a deeper correction before the price actually breaches the current ATH resting around the 2790 handle.
The Week Ahead
Today could potentially be a slow day with the New Years holiday tomorrow. In such a case we could see a similar repeat to yesterday’s price action with a slow grind to the downside.
The holiday tomorrow will be followed by a return on Thursday, January 2, 2025, which could bring about some volatility to markets as liquidity is expected to start returning to normal. Friday brings the last piece of high-impact data from the US with the ISM Manufacturing PMI release.
The data is unlikely to change the overall narrative of the USD and thus any moves inspired by the data is likely to remain short-lived.
Investing.com
