Happy Friday, traders. Welcome to our weekly market roundup, where we take a look back at these last five trading days with a focus on the market news, economic data and headlines that have had the most impact on gold prices and other key correlated assets – and may continue to do so going forward.
After initially looking like they might retrace last week’s modest gains, gold prices edged higher this week, breaking above a key level and consolidating new support.
It looks like there could be some major upside momentum and support for gold prices in the first quarter of this year, based on how trading has played out over the past five sessions, reaching the top of previous resistance at $2,700/oz.
The week started with a step back. A week ago, of the two narratives that appear to be the main drivers of short-term gold investing in early 2025—FOMC/monetary policy input function and lack of clarity (but plenty of rhetoric) around the incoming US administration’s fiscal policy plans—US fiscal policy uncertainty— and its impact on the dollar and treasury markets took the lead on Friday as traders looked for safety away from the USD and pushed the gold spot higher. This Monday saw the unraveling of that move as traders again clung to expectations that the FOMC would stick to its current hawkish projection of cutting interest rates just twice this year, prompting a jump in the US currency and a corresponding drop in gold prices.
Traders took a breather in gold and other major asset classes on Tuesday, with much focus on Wednesday’s CPI report. And there, strong inflows returned to gold. Initial headlines around the consumer inflation update called for a modest rise in headline inflation, although this was expected (according to market consensus) and remained below +3.0% y-o-y. What eventually captured investors’ focus, and subsequently their imaginations, was an unexpected drop, however small, in “core-CPI” (eg food and energy prices). After several months of generally stubborn inflation data, this brings back to the fore the possibility that during the first quarter or half of 2025, the always “data-dependent” Fed could be convinced to become more aggressive with rate cuts again if inflation begins to fall again . As a result, the dollar began what would be a significant two-day slide. To confirm this as a possibility, Fed Governor Waller publicly commented that such an improvement in inflation data could indeed convince the FOMC to again aim for three or even four cuts this year, with renewed hopes that a lower interest rate environment will arrive even sooner. , gold prices have been steadily recovering since mid-morning on Wednesday. This not only retraces to the $2,660 level, but also through the $2,700 level from which the chart has not looked since.
