Talking Gold — January 2025
Gold Market Recap: Prices Consolidate, Long-term Drivers Persist
The gold market exhibited notable volatility in December, ultimately closing the month with a 0.6% decline and ending the year at US$2,625/oz. Despite two consecutive down months, gold’s spot price achieved an impressive 27% gain in 2024 — outpacing both the S&P 500 Index and the Bloomberg U.S. Aggregate Bond Index.1
After an initial pop above US$2,700/oz. in early December, spot bullion fell to US$2,600/oz. as the U.S. Dollar Index continued to hover around multi-month highs, aided by resilient labor market data and sustained upward movement in 10-year Treasury yields following the US elections.2 A hawkish 25 basis point rate cut at the December FOMC meeting, coupled with Federal Reserve officials indicating only two more rate cuts in 2025 in their median projections, further pressured gold prices.3
Remnants of the post-US election risk-on tone lingered as the Bitcoin/Gold ratio hit an all-time high earlier in the month.4 By year end, government data from the World Gold Council showed emerging market central bank purchases, including from the People’s Bank of China (PBoC), were rebounding which helped stabilize gold prices.5
Looking ahead, we expect rebounding ETF inflows, central bank demand, easing monetary policy, and aggressive fiscal spending to underpin gold performance in 2025. Even if monetary policy in the US proves less accommodative, gold’s strong demand dynamics — especially in the APAC region which has seen significant growth in the past decade — will likely prevail (Figure 1).
Gold Performance Drivers
Flows: Global gold ETF holdings decreased by 0.4% in December or an estimated 9.6 metric tons(t). Money managers net long positioning on COMEX gold futures ended at 184,260 contracts in December, while also exhibiting a healthy rolling six-month average of 215,154. This sustained length and improving ETF demand trends suggest investor interest is still strong for gold.6
Factors: The 14-Day RSI began December indicating a neutral market. Momentum strengthened and peaked on December 11, as monthly CPI data indicated that inflation remains sticky.7 Levels retreated to neutral by month end as momentum continued to fade after the Fed projected fewer rate cuts in 2025 during its December FOMC meeting.8 Meanwhile, as restrictive forward guidance on monetary policy emerged, gold drifted under its 50-day moving average but found support off its 100-day average by the end of the month.
Fundamentals: The PBoC returned to the gold market in November after being on the sidelines for the past seven months.9 The Chinese yuan’s depreciation and economic woes continue to support gold consumption by both the PBoC and Chinese consumers. Additionally, the Reserve Bank of India (RBI) increased its gold reserves 9% in 2024. December marked the RBI’s 11th consecutive month of purchases, with an average monthly acquisition of 6.6t per month.10