(Kitco News) - Low holiday trading volume in the final week of 2024 is expected to keep gold prices contained within their narrow range, according to some market analysts.
Markets will be closed mid-week on Jan. 1, so many analysts remain focused on celebrating the New Year rather than monitoring financial markets.
Barring any major surprises on the horizon, many analysts predict that gold prices will remain caught in a tug-of-war between rising bond yields and safe-haven demand driven by increasing geopolitical and economic uncertainty.
This past week, gold prices were capped at $2,650 an ounce; however, the market was able to withstand significant headwinds as the yield on 10-year Treasury notes rallied to 4.64%, its highest level in seven months.
The precious metal remains range-bound heading into the weekend, even as bond yields stay elevated above 4.6%. Spot gold futures last traded at $2,618.30 an ounce, down 0.57% on the day. Meanwhile, gold prices are down 0.18% for the week.
“Gold’s resilience this week has been underpinned by escalating geopolitical tensions. Investors are closely monitoring conflicts in Eastern Europe and the Middle East,” said James Hyerczyk, market analyst at FX Empire, in a note Friday. “Israeli strikes against Houthi targets in Yemen and Russian drone attacks in Ukraine have reinforced gold’s appeal as a safe-haven asset. This geopolitical backdrop continues to keep gold in play, with traders hedging against the risk of further flare-ups.”
At the same time, some analysts note that social media comments from President-elect Donald Trump, expressing an interest in annexing Canada, the Panama Canal, and Greenland, have also heightened geopolitical uncertainty and tensions.
Hyerczyk said the key support level to watch next week will be $2,607 an ounce. He added that gold needs to break above $2,665.65 to regain its bullish momentum. In the current environment, he noted that the path of least resistance appears to be on the downside.
“Gold’s short-term outlook remains bearish, with rising yields and dollar strength acting as stronger drivers than geopolitical risks,” he said. “However, the current move is unfolding during a historically slow trading week, and thinner volumes may limit follow-through.”
Looking at economic data, the year ends with a fairly light docket, as markets will receive some home sales numbers and manufacturing data.
Markets will also continue to monitor the U.S. labor market, particularly next week’s weekly jobless claims data.
This past week, the number of continuing unemployment claims jumped to a one-year high. The data indicates that while the number of Americans applying for first-time unemployment benefits remains relatively stable, workers who are laid off are struggling to find new employment.
Jeffrey Roach, Chief Economist at LPL Financial, said elevated continuing claims suggest the job market is slowing down.
Economic data to watch next week
Monday: U.S. pending home sales
Wednesday: Happy New Year!
Thursday: U.S. weekly jobless claims
Friday: ISM manufacturing PMI
