Gold (XAU/USD), which fell more than 4% in the final week of the year, gained upward momentum as trading conditions normalized.
After an initial rise at the start of the week, XAU/USD entered a consolidation phase but ended the week higher. U.S. December inflation data and geopolitical risks are expected to drive short-term gold market movements.
Gold price rebounds after decline in 2025
Gold dropped significantly from Christmas to New Year's. Without clear catalysts, profit-taking sales led the decline, and light trading accelerated the drop.
As markets began to normalize, XAU/USD turned upward, rising more than 2.5% on Monday.
Furthermore, reports that U.S. forces entered Venezuela over the weekend and detained President Nicolas Maduro and his wife heightened geopolitical tensions, leading to increased demand for gold as a safe-haven asset.
The rally continued on Tuesday, with an additional 1% rise, but the U.S. dollar (USD) strengthened again, and XAU/USD stalled due to the CME Group's margin increase on gold and silver futures.
According to data released by Automatic Data Processing (ADP) on Wednesday, private sector employment in the U.S. increased by 41,000 in December, rebounding from a decline of 29,000 in November.
Meanwhile, the U.S. Institute for Supply Management (ISM) reported that the services sector Purchasing Managers' Index (PMI) improved from 52.6 in November to 54.4 in December.
Additionally, the PMI employment index rose above 50 for the first time since June, signaling an expansionary trend.
In light of these data, expectations are growing that the Federal Reserve will hold its policy steady at the January meeting, causing gold to decline during the week and enter a consolidation phase.
Meanwhile, China announced export restrictions on silver (XAG/USD). As a result, silver prices surged sharply at the start of the week, rising over 10% in just two days.
Regarding this issue, 'China is the world's second-largest silver mine producer, but backed by massive refining capacity, it dominates the silver market. China controls 60-70% of the world's refined silver supply,' said Mike Maharrey, FXStreet contributor and MoneyMantles Exchange Market Analyst.
Following CME's margin increase, XAG/USD plunged sharply, but the gold-silver ratio—which indicates how many ounces of silver are needed to buy one ounce of gold—fell nearly 4% throughout the week.
The gold-silver ratio is currently around 57, the lowest level since August 2013.
On Friday, the U.S. Bureau of Labor Statistics (BLS) reported that non-farm employment rose by 50,000 in December, falling short of market expectations of 60,000.
Meanwhile, the unemployment rate dropped from 4.6% in November to 4.4%. Market reaction to the employment data was temporary, and gold traded near the upper end of its range by week's end.
On the economic calendar, data releases this week are relatively limited. On Tuesday, the BLS is scheduled to release the December Consumer Price Index (CPI).
In U.S. economic data, November's retail sales and producer price index will also be released, but market interest is expected to be limited.
It is unlikely that December's inflation indicators will have a major impact on the January Fed decision, but if the monthly change in core CPI comes as a surprise, it could trigger a market reaction.
If it exceeds 0.3%, concerns about prolonged inflation could resurface, potentially boosting the dollar in the near term.
Conversely, if it is below 0.2%, it would have the opposite effect, supporting an upward move in XAU/USD.
This week, investors will also be watching news related to geopolitical risks. U.S. Secretary of State Marco Rubio is scheduled to meet with Danish and Greenlandic officials.
In a New York Times interview, U.S. President Trump reiterated his intent to acquire Greenland. 'Ownership is extremely important,' the president said.
"That's exactly what I feel psychologically necessary for success. Ownership provides something that leases or treaties cannot offer. Ownership brings elements and values that cannot be obtained simply by signing documents."
It's difficult to predict what will happen next, but if tensions between the EU and the U.S. escalate, investors may seek safe-haven assets.
Under these conditions, gold may strengthen further.
Ongoing anti-government protests in Iran have spread nationwide, including in the capital Tehran, and could impact market sentiment going forward.
President Trump stated that the U.S. could take military action if authorities use lethal force against demonstrators.
If tensions in Iran deepen and the U.S. becomes more actively involved, gold may continue to benefit from inflows as a safe-haven asset.
