(Kitco News) — Gold prices historically enjoy their best month of the year in January, but this new year brings a number of factors that make the yellow metal’s performance harder to handicap, according to Justin Low, currency analyst at ForexLive.
Low said that while gold still has seasonal support, the strong rally in 2024 and the Federal Reserve’s changing rate outlook make next month different.
“It's a bit of a tricky one this time around with gold prices rising by over 27% already in 2024,” he wrote. “Things have cooled off in November and December so far but that arguably owes much to the US election result, which in turn has also impacted the Fed outlook somewhat for next year. A surging dollar has helped to keep things in check, for now at least.”
“With gold poised to snap its December hot streak (there is still time to recover that, of course), is January - typically gold's best performing month - also under threat?” he asked.
Low said that over the past ten years, January has proven to be the best month of the year for gold. “However, that hasn't quite been the case in the post-pandemic era,” he noted. “One can argue that in part, there is some frontrunning in the buying in December. But, is it perhaps due to China also struggling during this period? After all, there is always the thought of that gold rush coming through ahead of the Lunar New Year celebrations.”
He pointed out that “in spite of what the central buying data might suggest,” Chinese gold demand has remained very strong over the last 12 months, but a couple of U.S. factors could hold gold back next month.
“The big one of course is market players still having the fresh memory of a more hawkish Fed from [the last meeting],” he said. “That has put the dollar in a decent spot and we could see broader markets pick up from that momentum at the turn of the year.”
The other issue Low sees is that the technical outlook for yellow metal has deteriorated somewhat over the past week.
“We saw price dip below its 100-day moving average for the first time in over a year but gold buyers did salvage that in recent sessions,” he noted. “The key level is seen at $2,616 currently and price is trading above that at around $2,635 [on Friday].”
“That said, it's tough to look into things when liquidity conditions are thin but this will definitely be a spot to watch when we resume normality,” Low said. “If buyers can maintain the technical control, that will be a positive boost for gold to stick with the January trend.”
With less than two days left before the start of 2025, gold prices are not inspiring confidence that the positive seasonal trend will hold. Spot gold dipped below the $2,600 per ounce level at 11:15 am EST, hitting a low of $2,596.18 shortly afterward.
Spot gold last traded at $2,604.85 per ounce for a loss of 0.65% on the session.
