(Kitco News) - After achieving its best annual gains in 14 years, gold has started 2025 on a quieter note, consolidating in elevated territory solidly above $2,600 an ounce.
Gold has managed to trade within a tight range during the two-week holiday period. However, as markets return to full activity on Monday, analysts note that the precious metal still faces some significant headwinds.
Solid economic data is supporting the U.S. dollar, which is trading at a 25-month high against a basket of currencies.
In a note on Friday, David Morrison, Senior Market Analyst at Trade Nation, said that bullish momentum is starting to build for gold and silver. However, he continues to monitor the impact of the U.S. dollar on next week’s price action.
“It will be interesting to see if [gold and silver] can make upside progress from here, even with the dollar at two-year highs,” he said.
While the U.S. dollar does pose a challenge for gold, Alex Kuptsikevich, Chief Market Analyst at FxPro, noted that there are times when gold and the U.S. dollar can move in tandem.
“The pressure on risk assets on December 31 and January 2, including a 1.5% rise in the dollar during this period, has not prevented gold from strengthening. Although the market amplitude remains rather unimpressive, a simultaneous rise in the dollar and gold as equities fall is characteristic of periods of safe-haven traction,” Kuptsikevich said in a note on Friday.
However, Kuptsikevich also highlighted that gold’s price action is signaling some technical bearish warnings.
“Gold tested its 50-day moving average in the first trading session of the new year. A dip below it in November broke the uptrend and sent gold into a consolidation phase after a 12-month rally of more than 50%. Failure to stay above this curve for long in November, December, and early January appears to be a bearish signal: too many sellers are looking to take profits,” he said.
Some analysts and economists note that next week could set the tone for the U.S. dollar and gold during the first quarter of the new year, as markets will receive important employment data.
While robust economic data will bolster the U.S. dollar and the growing sentiment of American exceptionalism, analysts continue to emphasize that any weakness in gold should be seen as a buying opportunity.
David Miller, Chief Investment Officer and Senior Portfolio Manager at Catalyst Funds, said he remains bullish on gold in the new year.
“Gold is trading above $2,600 an ounce, and there is good reason to believe the strength in gold in 2024 will carry over into 2025,” he said in a comment to Kitco News.
“BRICS countries don’t trust the USD after the U.S. and Europe weaponized the SWIFT system against Russia. They are moving their dollar reserves into gold, which they can physically hold and which cannot be seized. This trend is likely to continue in 2025,” he added. “The CBO is projecting a $1.9 trillion government deficit in 2025, which fundamentally weakens the dollar as the government continues to grow the debt year after year.”
Economic data to watch next week:
Tuesday: ISM Service Sector PMI, JOLTS Job Openings
Wednesday: ADP Employment, FOMC meeting minutes
Thursday: Weekly jobless claims
Friday: Nonfarm Payrolls, University of Michigan preliminary consumer sentiment
