Gold prices were in the red on Friday amid thin trading volumes, following the Christmas holidays. 

Trading volumes tend to be lower near the year-end. 

However, prices could edge up later in the day with yields on Treasury bonds in the US remaining subdued on Friday. 

Gold prices are on track to end the year with sharp gains.

Gold prices tend to benefit when bond yields fall as it reduces the opportunity cost for the yellow metal. 

At the time of writing, the February gold contract on COMEX was at $2,644.01 per ounce, down 0.4% from the previous close. 

Prices could swing between the positive and negative territory over the next two trading sessions with fewer economic data released towards the end of the year. 

Gold price: Fed policy and rising dollar’s impact

The US dollar was slightly higher earlier in the day, which weighed on the gold price on Friday. 

A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies, thereby limiting demand for the metal. 

Meanwhile, the recent hawkish tone of the US Federal Reserve was also weighing on the sentiments of the traders. 

The US Fed cut interest rates by 25 basis points last week but pointed at only two rate cuts next year instead of four. 

This weighed on the price of gold as higher rates increased the opportunity cost of the precious metal. 

However, softer inflation data from the US last week renewed some hopes of more rate cuts next year. 

“Gold, a non-yielding asset, gains traction as moderate US PCE inflation data challenges expectations of limited Fed rate cuts next year, hinting at the possibility of more reductions,” Akhtar Faruqui, forex analyst at FXstreet, said in a report. 

Geopolitical tensions affect gold price

On Thursday, Russia’s Federal Security Service announced that it had thwarted multiple assassination plots by Ukrainian intelligence targeting high-ranking Russian officers and their families in Moscow. 

The agency stated that the attacks were planned using bombs disguised as power banks or document folders, according to Reuters.

Meanwhile, Gaza authorities had reported five people were killed by an Israeli airstrike with several others across the Palestinian enclave. 

Faruqui said:

The safe-haven appeal is bolstered by heightened geopolitical risks stemming from the prolonged Russia-Ukraine conflict and ongoing tensions in the Middle East. 

Gold is set to end the year with a 27% gain since the start of 2024. This is also gold’s best annual return since 2010. 

In October, gold prices climbed more than 30% since the start of 2024. Prices had fallen in subsequent weeks due to a surging dollar but remained sharply higher.

Gold prices were fuelled by central bank purchases, safe-haven demand from geopolitical tensions and interest rate cuts by global central banks. 

Gold price: technical forecast

Gold prices have been hovering around $2,640 per ounce on Friday. 

Prices have breached the level of $2,630, which indicates a consolidation period. 

Faruqui said in the report:

 

The 14-day Relative Strength Index (RSI) hovers just below the 50 mark, reflecting a neutral sentiment. A decisive move above 50 could signal increased buying interest in the commodity.

On the upside, Faruqui said that gold could test the $2,700 per ounce level if buying momentum picks up. 

(Click on image to enlarge)

Source: FXstreet

The support for prices remains around $2,630 and $2,627. A break below these levels could increase selling pressure towards the monthly low of $2,583 per ounce, Faruqui said. 

More By This Author:

US Holiday Retail Sales 2024: What Drove The Unexpected Surge?
Recap 2024: Trump’s Triumph, Bitcoin’s Comeback And Geopolitical Turmoil
Adobe Stock Price Recoiled In 2024: Will It Rebound In 2025?