(Kitco News) - The gold market remains stuck in a consolidation pattern between $2,600 and $2,700 an ounce as it waits for another catalyst to drive the next move.
The precious metal found little direction on Friday following November’s employment report. The U.S. economy managed to create 227,000 jobs last month, slightly beating economists’ forecasts. At the same time, wages grew at a faster pace than expected.
However, a drop in the participation rate pushed the unemployment rate back to 4.2%.
According to economists, the labor market remains fairly resilient, even as it starts to slow. They do not foresee the latest employment data impacting the Federal Reserve’s plans to cut interest rates later this month. However, there are growing questions regarding the central bank’s monetary policy path in the new year as inflation remains stubbornly elevated.
“They will likely slow the pace of rate cuts in 2025,” said Bill Adams, Chief Economist for Comerica Bank, in a note on Friday. “After the December decision, the Fed is likely to switch to a quarterly pace of cuts, with subsequent cuts in March and June. If the government is enacting policies that accelerate growth, raise prices, and/or tighten the job market by then, the Fed could pause rate cuts in the second half of 2025.”
Economists note that the next piece of the economic puzzle comes next week with November’s Consumer Price Index and Producer Price Index data. An expected plateau in shelter costs could help ease core consumer prices and give the Federal Reserve room to cut rates, which would support gold prices.
However, some market analysts have said that they need to see a bigger catalyst than just stable inflation.
Christopher Vecchio, Head of Futures & Forex at Tastylive, said he is completely neutral on the precious metals market and can see scenarios where gold prices either continue to rally higher or drop significantly lower.
“I need to see some technical clarity before I make a bet on gold,” he said.
Vecchio added that there is plenty of bullish support for gold in the medium term. However, he noted that there are growing downside risks in the near term as speculative positioning remains elevated.
“The longer gold continues to consolidate, the more likely speculative traders are to take profits,” he said. “Gold is up significantly, so profits are kind of attractive.”
Vecchio said that if gold is going to attract new momentum, prices need to break above initial resistance at $2,725 an ounce.
Jesse Colombo, an Independent Precious Metals Analyst and Founder of the BubbleBubble Report, said that although there are growing downside risks, gold remains in a confirmed uptrend.
He noted that he sees the price action creating a volatility squeeze and added that it is only a matter of time before prices break out. Given the current uptrend, he expects prices to break out on the upside.
He added that prices would have to break below $2,500 an ounce to significantly damage the precious metal’s year-long rally.
“Central bank demand and institutional demand mean there is solid support for gold, so I don’t expect the market to completely collapse,” he said. “I actually don’t think a correction in the price would be a bad thing, as it would allow investors to accumulate more.”
Ricardo Evangelista, Senior Market Analyst at ActivTrades, said in a recent note that he remains neutral on gold as the price is caught in a tug-of-war.
“This price stability reflects a balance of conflicting market forces. On one hand, geopolitical instability remains abundant,” he said. “On the other hand, the prospect of the incoming U.S. administration pursuing a protectionist agenda is shifting market dynamics. As a result, treasury yields are rising, lending strength to the dollar and effectively capping gold’s upside potential.”
Although investors will have to wait until Dec. 18 for the Federal Reserve’s monetary policy decision, next week will be busy with other central bank announcements. Some analysts have noted that falling global interest rates make gold an attractive asset.
Economic data to watch next week
Monday: Reserve Bank of Australia monetary policy decision
Wednesday: US CPI, Bank of Canada monetary policy decision
Thursday: Swiss National Bank monetary policy decision, European Central Bank monetary policy decision, US PPI, US weekly jobless claims
