(Kitco News) - Despite ending the week in negative territory, the gold market managed to hold critical support at around $2,600 an ounce, even after the Federal Reserve signaled it would slow the pace of rate cuts in 2025.
Gold struggled during the last full trading week of 2025 as investors prepared for the Federal Reserve to announce a hawkish rate cut.
As expected, the central bank cut the Fed Funds rate by 25 basis points; however, updated economic projections revealed that forecasts for interest rates, also known as the dot plot, indicated only two rate cuts next year, putting rates at 4%. In September, the Federal Reserve had forecasted four rate cuts for the new year.
Analysts note that gold could still face challenges in this environment during the shortened holiday trading season.
A hawkish (and confused) Fed + Trumps ongoing tariff threat is creating more uncertainty into yearend helping drive the US$ seasonally to its strongest handle in 20 years.
That short-term $ shortage will drive illiquidity & more volatility.
Gold & Silver don't like illiquid… pic.twitter.com/k7CsqK6q5g— Nicky Shiels (@nixsa84) December 20, 2024
Commodity analysts at TD Securities said in a note Thursday that the path of least resistance for gold could be lower in the near-term.
“While we do not expect a rout, given uncertainties surrounding Fed policy should inflation continue to be higher-than-expected (eg. tariffs) and the economy start to slow at the same time, new geopolitical risks and a renewed round of central bank buying, somewhat lower prices are still likely in the near-term. It would not be surprising to see prices drift down to the November lows of $2,537/oz,” the analysts said.
However, other analysts see gold caught in a tug-of-war between the Federal Reserve’s monetary policy and geopolitical uncertainty.
Gold managed to hold critical support Friday after the U.S. Congress was unable to pass a spending bill before the holidays. The government is once again on the brink of a partial shutdown that will affect everything from border enforcement to national parks and furlough up to two million employees.
“The government facing another shutdown demonstrates how much geopolitical uncertainty there is,” said Chris Mancini, Associate Portfolio Manager of The Gabelli Gold Fund (GOLDX). “This will continue to support gold as a safe-haven asset.”
Ryan McIntyre, Managing Partner at Sprott Inc., said he is looking past gold’s short-term volatility, noting that geopolitical and financial market uncertainty will continue to support long-term safe-haven demand for gold.
“Trump’s term hasn’t even started, and we are already dealing with this,” he said.
Although the Christmas holiday next week means most traders will be focused on turkey and presents, some key economic data will be released. Analysts note that, with little trading volume expected next week, the gold market could experience higher volatility.
Economic data to watch next week:
Monday: US consumer confidence
Tuesday: US durable goods, new home sales
Wednesday: Merry Christmas
Thursday: US weekly jobless claims
