Thus far, 2025 has been all about increased market volatility mostly created by a chaotic incoming U.S. president threatening the Panama Canal and Greenland with military intervention, while also threatening to use economic force on trading partners Canada and Mexico.
We have also experienced stronger-than-expected job numbers that suggest the Fed cutting rates further might not be on the agenda, sticky inflation, and raging wildfires here in Los Angeles where the economic impact is yet unknown.
Although there are early estimates of up to $270 billion in damage, I suspect it could go much higher after witnessing the destruction first hand in neighborhoods near my home in Monrovia.
With two major fires in L.A. County having yet to be completely contained, insurance companies are teetering on the edge of bankruptcy and many homeowners may come out empty-handed as they try to rebuild in a disaster zone that looks worse than Gaza.
That is, if they are not set to join the permanently homeless population, which was already a growing crisis in the City of Angels long before these fires began.
After a stellar 2024, which saw the gold price rise over 27%, long-term price charts and macro fundamentals still firmly favor the safe-haven metal going higher once a now 12-week correction has run its course.
As mentioned in this column heading into the U.S. presidential election, gold had been long overdue for a 5-10% correction. The 54% 12-month surge in bullion into the end of October 2024 had yet to experience as much as a 5% correction heading into a chaotic U.S. election, with the overwhelming result having led to some healthy profit taking from an extreme overbought situation.
After the year-long $978 move higher peaked at $2802 on October 30, Gold Futures fell by nearly 10% in just 13 trading sessions to a November 14 low at $2541.
Since then, gold has been consolidating within a now 12-week symmetrical triangle by making lower highs and higher lows above strong support on its rising 200-day moving average, now at $2520. There is key weekly resistance at $2750 and important support at $2600 within the triangle.
Triangle formations on charts are considered continuation patterns, meaning that the price trend before the symmetrical triangle formation is likely to continue once the pattern plays out.
A breakout above $2750 would signal a move to $3000, which is the initial target of the 13-year cup & handle March 2024 breakout, with a logarithmic target of $4000.
Following better-than-expected but still rising U.S. CPI data on Wednesday, the S&P 500 surged to its downtrend line as the gold price rose to test $2750 resistance of this bullish consolidation pattern by Thursday.
While headline CPI accelerated compared to the previous month, core inflation rose at a slower pace than in November, which increased the probability of a 25-basis point rate cut by the Federal Reserve in June.
After coming within 20 basis points of the key 5% level, 10-year Treasury yields were broadly falling Wednesday morning after the U.S. CPI for December included a softer-than-expected monthly core reading of 0.2%, below the 0.3% reading that had been anticipated by economists polled by the Wall Street Journal.
As of this writing, the U.S. 10-year yield is trading around 4.62%, over 2.5% lower than its peak performance this week on Tuesday at 4.8%.
Financial-market participants’ initial reaction to the data suggested that investors were relieved the inflation numbers were not worse. The combined December CPI report and Tuesday’s PPI report suggest that while price pressures have yet to come anywhere near the Fed’s 2% target, they are not showing signs of reacceleration either.
Following the release of U.S. inflation data, Fed-funds futures traders slightly boosted the likelihood of at least a quarter-point Fed rate cut by June, and still see a possibility of a total of two or more rate cuts before year-end.
According to the CME FedWatch Tool, the odds of interest rates being lower than current levels after the June meeting stand at 63.8%, compared to 57.3% before the inflation data and 51.4% on Monday.
The Federal Reserve’s rate cut decisions and indications for 2025 have impacted gold’s appeal, while persistent geopolitical tensions and economic uncertainties continue to support the metals safe-haven status.
On Thursday, Israel intensified strikes on Gaza hours after a ceasefire and hostage release deal was announced, as mediators sought to quell fighting ahead of the truce's start on Sunday. Israel said Hamas has reneged on parts of the ceasefire and hostage-release deal, creating a last-minute crisis, and risking the Gaza ceasefire.
Furthermore, U.S. President-elect Donald Trump's advisers now concede that the Ukraine war will take months or even longer to resolve, a sharp reality check on his biggest foreign policy promise - to strike a peace deal on his first day in the White House. This as Russia launched a new barrage of missiles and drones at Ukraine on Thursday, targeting gas infrastructure and other energy facilities.
The latest inflation data and market reactions underscore gold's traditional role as an inflation hedge that also protects investors against economic and political uncertainty during an untenable global sovereign debt crisis.
As economic policy shifts, with geopolitical and inflation concerns persisting as government debt rises exponentially, the safe-haven metal continues to attract investor interest, suggesting sustained momentum in the gold complex through 2025.
Expectations are growing that inflation will persist as President-elect Donald Trump moves forward with plans to extend and expand his 2017 tax cuts and support the sluggish manufacturing sector through global tariffs. With the result likely creating a global trade war, while slowing the economy and weakening the labor market.
In the run-up to Trump's inauguration next week, he threatened Mexico and Canada with broad 25% levees on everything unless they adhered to his desires.
Since then, however, Trump’s economic team is reportedly considering a plan to gradually increase tariffs. This gradual approach is seen as likely to complicate traders’ ability to figure out how the Fed might respond, even if it would probably prevent a massive one-time inflationary hit to U.S. consumers.
Donald Trump's inauguration on Monday could herald a more volatile period for the marketplace, with a Republican controlled congress seen moving quickly on a wide swath of issues including trade and immigration that are expected to swing asset prices.
Trump's tariff plans could further fan inflation fears that pressures bond and stock prices, while efforts to tighten immigration controls could also reverberate through those markets.
As we head into Trump 2.0 beginning next week, there is significant economic uncertainty as investors are trying to parse every word and nuance that comes from the incoming President and his biggest allies.
Words from the 47th President of the United Staes may have a more significant impact than economic data. Headlines coming from X and Trump's own Truth Social may have the greatest impact on markets, as they come directly from the President and require some editing.
Armed conflict is the top risk in 2025, a World Economic Forum (WEF) survey showed, a reminder of the deepening global fragmentation as government and business leaders attend the annual gathering in Davos next week.
The controversial WEF gets underway on Jan. 20 and Donald Trump, who will be sworn in as the 47th president of the United States on the same day, will address the meeting virtually on Jan. 23.
Meanwhile, both silver and the miners have continued to lag the gold price coming into 2025, with lackluster volume being featured in the mining complex.
Despite the gold price rising over 27% in 2024, the miners remain approximately 40% below their 2011 peaks, even as gold prices have risen roughly 40% since then.
Compared to historically overvalued equities, miner valuations are attractive, with the senior producers trading at 0.60x Net Asset Value (NAV) as gold appears set to breakout to fresh all-time highs.
According to a recent report from Canaccord Genuity, this under-owned sector has fallen back from a high of 0.74x NAV back in August, below the historical average of 0.81x, and below the lower end of the 0.63-0.98x range.
Both GDX and GDXJ have strong support at $32 and $40, respectively, where both miner ETFs broke out following the aforementioned 13-year cup & handle gold breakout at $2100 in March 2024.
After tax-loss related selling was completed at the end of December, I expect the downside is limited to these levels while quality juniors are presenting lower-risk entry points.
Progressive closes above $37 in GDX and $47 in GDXJ would promote more upside, whereas failing to recapture these levels in January would open the door to more consolidation and late December daily upside gap fills.
Meanwhile, the CDNX weekly chart shows an uber-bullish inverse H&S base pattern and a breakout above the 640 neckline could create a powerful rally and technically cement a strong accumulative 2-year base in the junior sector.
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