Gold seems to be in a range after the metal rebounded from its recent weekly low last week. Gold rose 24% in 2024 because of ongoing rate cuts from global central banks, geopolitical tensions and strong demand. Gold may be faced with uncertainty from various factors especially from the Fed’s next moves on interest rates and rising inflation in the U.S. which could affect rate cuts.
Following the Federal Reserve’s 25 basis point rate cut on December 18, gold’s price has remained lower. The Fed’s forecast for only two rate cuts in 2025, as opposed to the four in September, prompted selling and drove gold to its lowest level since mid-November, despite the cut’s initial price boost.
In early November, Donald Trump’s election victory in the US presidential election triggered a rally in the U.S. Dollar despite the Fed’s rate cut in November. As a result, gold turned bearish and declined 3%, snapping a four-month winning streak.
Bearish For Gold
A de-escalation of geopolitical tensions in the Middle East or a resolution to the Russia-Ukraine crisis could lead to a sharp correction in gold prices, given its reliance on these conflicts throughout 2024. Trump’s “America First” approach may focus on domestic policies, potentially sidelining international affairs. However, efforts to initiate a resolution process in these conflicts could weigh on gold prices.
A hawkish Federal Reserve could also pressure gold. If inflation remains persistent and Trump continues with tariff increases, the Fed might slow its rate-cutting trajectory. Without significant labor market downturns, the Fed could maintain a patient stance, reducing gold’s appeal.
The performance of China’s economy remains critical. If Trump intensifies tariffs on Chinese imports, retaliation from China could hurt its economy, the world’s largest consumer of gold. A weaker Chinese economy could negatively impact gold demand and prices.
Bullish For Gold
Gold prices could gain momentum in 2025 as central banks implement policy easing measures. If inflation stays under control, further rate cuts by the Federal Reserve could lower bond yields, making gold more attractive. Capital outflows from the Euro and British Pound into gold might also strengthen its position, especially if the ECB and Bank of England adopt aggressive monetary easing strategies.
An improving Chinese economy could further boost gold demand. With plans for loose monetary policies and proactive fiscal measures, China might have plans to stimulate growth, leveraging low inflation to implement flexible economic stimulus. Meanwhile, escalating geopolitical tensions, such as renewed Middle East conflicts or stalled Russia-Ukraine negotiations, could bolster gold’s appeal as a safe-haven asset amidst global uncertainties.
Technical Analysis
Source: TradingView
XAUUSD rebounded from $2,586 which is its recent low after being driven down below the pivot line by strong bearish pressure. RSI (14 Day) shows that the price is below 50 which shows that the price is still bearish.
If bearish pressure carries on, price could continue its downtrend, with traders keeping a close eye on the $2,536.4 level as a potential support. If price can pull back, bulls may look to recapture ground above $2,650 and might help the price rally again.
