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• Gold looks to end 2024 with a stellar gain, currently up 27% year-to-date, matching the Nasdaq 100’s rise
• Headwinds for early 2025 include weaker currencies in China and India, strong bond yields and a resilient US dollar
• Gold’s appeal as a store of value, inflation and geopolitical tensions could eventually help push gold to $3K

Gold has started this holiday shortened weak positively, after rebounding at the back end of last week. There are not many catalysts to drive the yellow metal decidedly in a particular direction for the remainder of this year, but month-, quarter- and year-end factors come into play that may cause some volatility. Gold is ending 2024 with mixed feelings for investors, after a strong rally that commenced in February ended in October. This means that in the short-term at least the bullish momentum has faded.  The precious metal was still managing to keep up pace with major stock indices like the Nasdaq 100 in terms of year-to-date percentage gains. But it has been overshadowed by Bitcoin’s staggering upsurge. Looking ahead to 2025, I think gold may find it a bit more challenging to continue its bullish form, but an eventual rise to $3000 is still my base case scenario, especially if the gold chart manages to break out from the long-term bull flag continuation pattern to the upside.

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Factors that could hold gold back

Central banks played a key role in gold’s 2024 rally, with rate cuts across the globe fuelling demand. However, inflationary pressures persisted, prompting caution from the Federal Reserve, European Central Bank, and Bank of England. As inflation remains sticky, particularly with strong wage growth in focus, monetary policy is expected to remain tight in early 2025.  This cautious stance supports elevated bond yields and a strong US dollar index —two significant headwinds for gold. Higher bond yields increase the opportunity cost of holding non-yielding assets like gold, while a strong dollar makes gold more expensive for international buyers. Unless central banks pivot more aggressively towards easing, gold’s upside may be limited in the first half of the year.  On top of this, you have a weakening Chinese economy, which is never a good sign given they are the world’s largest gold consumer nation.
 

But long-term fundamentals remain supportive

Despite short-term challenges, a $3,000 gold price target remains plausible. Early 2025 may bring corrections or consolidations, but that could attract bargain hunters and long-term investors looking to pick the dips, especially those who missed out on the 2024 rally. This renewed interest could set the stage for a rally, potentially later in the year when the US dollar is likely to have topped. Central banks, which slowed gold purchases in late 2024, might also return as buyers if prices correct significantly.  Furthermore, gold’s appeal as a store of value remains strong amid inflation concerns and geopolitical tensions. Whether it’s conflict in the Middle East or shifting global trade policies, these factors could boost safe-haven demand, creating additional tailwinds for gold. These factors could at least partially offset demand weakness arising from key markets like China or India.
 

In short…

So, while near-term obstacles like strong yields and a resilient dollar may weigh on prices, the longer-term outlook remains constructive. For investors and market watchers, gold continues to shine as a vital asset in an uncertain world. 

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