Gold has experienced a significant increase in value this year, with prices set to close with a 27% gain, making it the strongest annual performance since 2010. This trend has been driven by central bank purchases, rising geopolitical tensions, and monetary easing policies implemented by major central banks. Despite this positive outlook, the non-yielding metal faces pressure from indications of fewer rate cuts by the Federal Reserve in 2025. However, gold remains supported by the prolonged conflicts in Russia-Ukraine and the Middle East.
Investors are reacting to indications of a hawkish stance by the Federal Reserve as robust labor market data and persistent inflation have led FOMC members to project fewer rate cuts in 2025. This has caused a slight decline in gold prices during Q4. However, the safe-haven status of gold is expected to receive support from the incoming Trump administration’s economic strategies and the Federal Reserve’s interest rate outlook for 2025. The demand for gold could increase due to potential tariffs and trade policies that may trigger trade conflicts.
The US Dollar Index remains subdued as traders digest the Federal Reserve’s hawkish pivot, leading to support for gold prices. Additionally, US Treasury bond yields have decreased, providing further support for safe-haven assets like gold. Geopolitical risks stemming from conflicts in Russia-Ukraine and the Middle East continue to contribute to the demand for safe-haven assets. Recent warnings from Israeli and Russian officials regarding potential attacks and conflicts highlight the ongoing geopolitical tensions that support gold prices.
Technical analysis suggests that gold prices are currently consolidating near the nine- and 14-day Exponential Moving Averages (EMAs) around $2,610.00 per troy ounce. The Relative Strength Index (RSI) indicates a neutral sentiment, with support around $2,583.39 and resistance at the nine- and 14-day EMAs. A break above these levels could see gold prices approaching $2,700.00 and potentially reaching the monthly high of $2,726.34.
Gold has a long history as a store of value and medium of exchange and is widely considered a safe-haven asset during turbulent times. Central banks play a significant role in holding gold reserves to support their currencies and diversify their reserves. Gold has an inverse correlation with the US Dollar and US Treasuries, making it an attractive asset for diversification during times of economic uncertainty. The price of gold is influenced by various factors, including geopolitical instability, interest rates, and the strength of the US Dollar. Overall, gold’s performance in 2025 is expected to be influenced by these factors and the ongoing global conflicts.
