Unlocking Gold’s Potential in 2025: What Traders Must Know!!!COMEX:GC1! After a strong rise in 2024, gold has started to solidify its position in 2025. Known for its status as a safe-haven asset, gold benefited from economic uncertainty, geopolitical tensions, and changes in monetary policy. Undoubtedly, by the end of 2024, profit-taking occurred, which caused gold prices to fall from their historic highs. However, as 2025 begins, traders are readjusting their perspectives and strategies, which is providing support to gold.
1. Review of 2024: A Glorious Year for Gold
• In 2024, gold saw a significant surge, with prices rising sharply due to various factors. Changes in central bank policies, particularly the Federal Reserve's rate cuts, played a crucial role in driving gold prices higher. Gold ended the year up 27%, marking a 23% increase compared to the previous year.
• The primary reasons for the pullback from gold's historic highs were twofold. First, traders began to lock in profits, as the annual price increase for this precious metal seemed too good to be true. Second, U.S. economic data, particularly inflation figures, began to show signs of an unexpected reversal. After dropping to its lowest point in 2024, U.S. inflation data began to rise, causing the Federal Reserve to reconsider its extremely dovish monetary policy, which led to multiple rate cuts throughout the year. By the end of 2024, traders' sentiment indicated that the Fed was unlikely to cut rates further in its next meeting, which resulted in the U.S. dollar index rising relative to gold prices.
2. Recalibrating with a New Perspective
• As we enter 2025, traders are considering three key factors that could significantly support gold prices. First, a major event will take place on January 20, when the new president will be inaugurated. The elected president may pressure the Federal Reserve to cut rates further, advocating for a lower interest rate environment. This suggests that, despite some members of the Fed being reluctant to lower rates, the Federal Reserve may be compelled to do so under pressure from the new president.
• Second, the incoming president is expected to escalate trade tensions with other countries, potentially affecting economic growth and increasing geopolitical uncertainty. If this occurs, it may lead some investors to reconsider the U.S. dollar’s status as a safe-haven currency, which could increase demand for gold.
• Third, we are entering a period in which most investors are reallocating funds within their portfolios. Considering the performance over the past two years and the potential for trade policy-driven geopolitical tensions, we may see a fresh influx of capital into gold.
3. Price Trends
• Gold prices have now surpassed the 50-day simple moving average (SMA), which is a positive indicator for the trend. As long as prices remain above this level, we may see a more bullish momentum in the market.
