(Kitco News) – Thin holiday trading continued to support gold prices on Friday as investors navigated significant volatility driven by shifting geopolitical sentiment.
The gold market started the week with a dramatic 3% drop on Monday after President-elect Donald Trump nominated Scott Bessent, a traditional Wall Street financier, to lead the U.S. Treasury Department. Markets expect Bessent to be a steady, safe hand for the U.S. economy.
A potential ceasefire between Israel and Lebanon, announced at the start of the week, also eased geopolitical fears, reducing gold’s safe-haven appeal.
However, gold gained a fresh safe-haven bid the following day after Trump threatened Mexico and Canada with 25% tariffs and proposed a 10% tariff on all products from China.
Chantelle Schieven, Head of Research at Capitalight Research, said she expects the gold market to experience some volatility in the near term as markets continually react to Trump’s comments ahead of his inauguration.
“Right now, we are in a wait-and-see mode, and markets will be extremely sensitive as we just don’t know what the new administration will look like,” she said. “We don’t know how much of his comments are just bluster or how hard he will push to implement his policies.”
In the short term, Schieven said gold prices could remain rangebound between $2,500 and $2,750. While this may frustrate some investors and traders, she emphasized that this consolidation period will be healthy for the gold market.
“I don’t think we should be too concerned with this volatility,” she said. “Gold is still up significantly and holding its own. I think this is a healthy consolidation.”
Although the gold market is ending the week on a positive note, some analysts believe Monday’s selloff might indicate that the path of least resistance is lower.
“Gold prices have certainly seen some recovery this week, as news of stubborn inflation has pushed investors back into the arena,” said Naeem Aslam, Chief Investment Officer at Zaye Capital Markets. “But we think it’s possible that prices could move a bit lower still, as the current correction isn’t over yet.”
Alex Kuptsikevich, Chief Market Analyst at FxPro, said that while bearish traders currently dominate gold’s price action, the market remains relatively resilient. On the downside, he pointed out that $2,540 per ounce is a key level to watch, as a break below this could bring $2,400 into play.
However, he noted that gold has managed to hold solid support above $2,600.
“The slow but steady rally from Tuesday to Friday suggests cautious buying, indicating continued interest even at current historically high levels. A weekly and monthly close above $2,670 could signal further gains, marking a return to territory above the 50-day moving average,” he said.
In addition to Trump’s social media posts, markets will focus on critical economic data next week. This past week, the Federal Reserve’s preferred inflation gauge, the core Personal Consumption Expenditures (PCE) Index, showed consumer prices rising 2.8% over the last 12 months, coming in hotter than expected.
The central bank also indicated in its latest meeting minutes that higher-than-expected inflation could force it to adjust the pace of its easing cycle. However, markets still anticipate the Federal Reserve will cut interest rates by 25 basis points in December and will continue cutting through early 2025.
According to some economists, next week’s employment data could significantly impact these expectations. Persistent strength in the U.S. labor market could push rate cuts off the table next month.
Additionally, the market will be watching key manufacturing and service sector data.
Economic data to watch next week:
Monday: ISM manufacturing PMI
Tuesday: US JOLTS job openings
Wednesday: ADP employment data, ISM services PMI, Federal Reserve Chair Jerome Powell to participate in a moderated discussion at the New York Times DealBook Summit
Thursday: Weekly jobless claims
Friday: US nonfarm payrolls report, University of Michigan preliminary consumer sentiment
