Market Analysis by Quasar Elizundia, Expert Research Strategist at Pepperstone
January 17, 2025 –
“Gold prices continue to advance, supported by a confluence of economic and geopolitical factors generating uncertainty in the markets. XAU/USD recorded a 0.7% increase on Thursday, marking its third consecutive session of gains. This rally comes in a context where economic signals from the United States present a mixed picture, relatively influencing expectations about the Federal Reserve’s monetary policy.
Recent data, such as the disappointing retail sales figures for December, which showed 0.4% growth (the lowest in four months, below the 0.6% forecast), and the rise in jobless claims, which reached 217,000, exceeding market expectations of 210,000, have adjusted speculations toward a potentially less restrictive stance by the Fed. These figures contrast with the earlier series of positive economic data, such as job openings, the employment report (NFP), and the services PMI, which had strengthened the outlook for more aggressive monetary policy and consequently pushed up U.S. bond yields, exerting pressure on gold prices.
The recent weakness in consumption data and the slight rise in jobless claims act as a pause in the favorable data trend previously seen in the U.S. economy. This shift in perspective is a key factor driving interest in gold.
However, the outlook for gold is not without risks. In the short term, the upcoming Trump inauguration introduces an element of market uncertainty, which has historically favored precious metals. Nonetheless, in the long term, the expected protectionist trade policies of the new administration could generate inflationary pressures, which in turn may lead the Fed to adopt a more restrictive stance, favoring assets such as U.S. Treasury bonds and limiting gold’s upside potential.
While geopolitical uncertainty and the search for safe havens drive gold demand in the short term, the long-term implications of economic policies, particularly those related to trade and inflation, warrant continuous monitoring.
Finally, geopolitical tensions, particularly in the Middle East, have traditionally been a supportive factor for gold prices. A potential continued easing of these tensions could reduce the buying pressure on gold.In summary, gold prices are currently at a critical operational point, influenced by a complex interaction of economic and political factors. Investors should closely monitor the evolution of the U.S. economy, the Federal Reserve’s stance, and geopolitical developments to anticipate future fluctuations in the gold market.”
Analysis by Quasar Elizundia, Expert Research Strategist – Pepperstone