Gold Prices Drop Ahead of Christmas Despite Cooling Consumer Sentiment

 

Gold Prices Drop Despite Cooling Consumer Sentiment 

(Bullion News Network) – Gold prices dropped again to begin the holiday week, despite evidence that the post-election boost in consumer confidence may be fading. December’s consumer confidence readings came in cooler than expected, dropping 8.1 points and undoing the post-election boost markets enjoyed in November. In its report, the Conference Board noted that its short-term income expectation index is now “just above the threshold” of 80 that typically precipitates an upcoming recession. Gold, which tends to overperform during periods of recession and economic uncertainty, continued to slide on the news. Today’s losses are limited to just a bit over $10.80/oz, as of 12:30 PM CST. 

Consumer confidence jumped in the immediate aftermath of President-Elect Donald Trump’s electoral victory in early November, but today’s readings suggest that the increased market optimism may be a temporary blip. The findings of the Conference Board show consumer confidence falling to pre-election levels, which were among the lowest in recent years. Stocks moved opposite to gold to start the shortened holiday trading week, with the Dow, Nasdaq, and S&P 500 all rising sharply higher this morning. 

As of 5:00 PM CST, gold’s losses remained relatively steady. Gold gained over $2 back to place it down by just over $8.10 per troy ounce by the market close; the metal remains nearly $18.50 over the $2,600/oz support. Silver prices steadied in the afternoon after moving opposite to gold in the morning. Silver now trades at $29.80/oz, 20 cents away from crossing back over the $30 line it lost last week. The price action, combined with gold’s minor pullback, drove the gold-silver ratio down below 88:1. The GSR will end the day around over $.90 lower than Friday’s quote. Platinum group metals gained on the day as well. Both metals jumped over $22 this afternoon, leaving gold the only loser out of the four most commonly traded precious metals. 

Gold regained about $1.50 toward midday, but prices remain down. Silver, platinum, and palladium all logged gains on the day.

The GSR is likely to settle at around 87:90, .83:1 down from Friday’s ratio.

— Hero Bullion (@HeroBullion) December 23, 2024

The holidays are typically characterized by muted price action, so traders are likely watching carefully to see how gold may respond to economic and geopolitical stimuli after 2025 begins. The beginning of 2025 is likely to be a chaotic one, with a slew of new congressmen and a new U.S. presidential administration being sworn in by the end of January. This weekend, President-elect Trump continued to expand on his policy plans and reaffirmed his commitment to leveraging tariffs as a diplomatic tool to improve the United States’ standing with other nations, a controversial policy that detractors say may increase consumer prices, trigger counter-tariffs, and inflame relations with allies. 

The tariff debate will be especially important for gold traders. The U.S. is the world’s eighth largest importer of gold, according to the Observatory of Economic Complexity, and many of the high-premium gold coins and bars that make up the retail trade are imported from other nations. Earlier this month, markets got a taste of what premiums may mean for the precious metals industry as gold prices jumped in the wake of more tariff talks from the President-Elect. If Mr. Trump’s promises to leverage blanket premiums on other nations become reality, it could be a major motivator of price action for gold, silver, and other precious metals heading into 2025.

Also weighing heavily on safe haven asset markets to start the new year is a wide range of armed conflicts across the globe, particularly in the Middle East and Ukraine. Israel continues its war on Hamas in Palestine but now prepares to fight the Houthis in Yemen after a Houthi airstrike injured 16 Israelis in Tel Aviv. In Syria, infighting between several factions backed by other world powers has thrown the future of the country’s leadership into question after the ousting of the Assad regime earlier this month. President-Elect Trump will inherit a complex set of conflicts in the Middle East to start his second term in office, and the war between Ukraine and Russia continues to rage on with a growing heat. 

Precious metal futures markets are also expected to be influenced by interest rate speculation in 2025, as was the case for much of this year. Prices dove last week after the Federal Reserve confirmed a “hawkish” rate cut. The Federal Open Market Committee (FOMC) cut rates by 25 basis points in its last meeting of the year but revised its 2025 projection down from four to just two rate cuts. Federal Reserve Chair Jerome Powell acknowledged in his press conference following the decision that the Fed will continue to weigh both the “balance of risks” and the general economic outlook in making future rate cut decisions, so these projections could easily change as economic data from December begins to roll in in mid-January. 

Gold prices end the day down from Friday by about $9.30 as markets prepare for a shortened holiday trading week.