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XAUUSD - Gold has started the holidays on a positive note after a rebound last weekend. There aren't many catalysts pushing the precious metal in one direction for the remainder of the year, but factors like the month-end, quarter-end, and year-end could contribute to volatility.
Gold is ending 2024 with mixed feelings for investors after a strong rally that began in February and ended in October. This means that, at least in the short term, the bullish momentum has faded.
However, the precious metal has still managed to keep up with major stock indices like the Nasdaq 100 in terms of year-to-date percentage gain. This, however, is overshadowed by the surprising rise in Bitcoin.
Looking ahead to 2025, I believe it may be slightly harder for gold to maintain its bullish form, but the $3,000 target is still my baseline case, especially if gold manages to break out of the long-term bull flag continuation pattern.
This cautious stance supports rising bond yields and a strong U.S. dollar – two significant headwinds for gold. Higher bond yields increase the opportunity cost of holding non-yielding assets like gold, while a stronger dollar makes gold more expensive for international buyers.
Unless central banks take more aggressive easing measures, gold’s rise may be limited in the first half of this year. Additionally, the economic weakness in China, the world’s largest gold consumer, is not a positive sign.
This renewed interest could set the stage for another rally, potentially occurring later in the year when the U.S. dollar likely reaches its peak. Central banks, which slowed down gold purchases at the end of 2024, may also return as buyers if prices correct significantly.
Moreover, gold’s appeal as a store of value remains strong amid inflation concerns and geopolitical tensions. Whether it’s the conflict in the Middle East or shifts in global trade policies, these factors could drive demand for gold as a safe haven, providing additional support. These factors could at least offset some of the weakening demand from major markets like China or India.
Gold is ending 2024 with mixed feelings for investors after a strong rally that began in February and ended in October. This means that, at least in the short term, the bullish momentum has faded.
However, the precious metal has still managed to keep up with major stock indices like the Nasdaq 100 in terms of year-to-date percentage gain. This, however, is overshadowed by the surprising rise in Bitcoin.
Looking ahead to 2025, I believe it may be slightly harder for gold to maintain its bullish form, but the $3,000 target is still my baseline case, especially if gold manages to break out of the long-term bull flag continuation pattern.
Factors That Could Hold Gold Back
Central banks played a key role in gold’s rally in 2024, with interest rate cuts worldwide boosting demand. However, inflationary pressures persist, keeping the Federal Reserve, European Central Bank, and Bank of England on alert. As inflation remains high, especially with strong wage growth, monetary policy is expected to stay tight in early 2025.This cautious stance supports rising bond yields and a strong U.S. dollar – two significant headwinds for gold. Higher bond yields increase the opportunity cost of holding non-yielding assets like gold, while a stronger dollar makes gold more expensive for international buyers.
Unless central banks take more aggressive easing measures, gold’s rise may be limited in the first half of this year. Additionally, the economic weakness in China, the world’s largest gold consumer, is not a positive sign.
Long-Term Fundamentals Still Support $3,000 in 2025
Despite short-term challenges, a $3,000 gold target remains reasonable. Early 2025 might bring a correction or consolidation, but this could attract bargain hunters and long-term investors looking to capitalize on lower prices, especially those who missed out on the 2024 rally.This renewed interest could set the stage for another rally, potentially occurring later in the year when the U.S. dollar likely reaches its peak. Central banks, which slowed down gold purchases at the end of 2024, may also return as buyers if prices correct significantly.
Moreover, gold’s appeal as a store of value remains strong amid inflation concerns and geopolitical tensions. Whether it’s the conflict in the Middle East or shifts in global trade policies, these factors could drive demand for gold as a safe haven, providing additional support. These factors could at least offset some of the weakening demand from major markets like China or India.