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Gold prices have long been a barometer of investor sentiment, reflecting concerns about items like inflation, interest rates and global economic stability — and the gold price trends that occurred throughout 2024 are a clear example. The price of gold began to climb early last year, bolstered by persistent inflation and lingering uncertainty in financial markets, hitting numerous record highs on its uphill ascent. While the price moderated somewhat late in the year, the uptick in gold prices started again in early 2025, with the price of gold now sitting near another record high, signaling robust investor demand.
Several factors have contributed to gold’s renewed ascent during the first weeks of the new year. One is that inflationary pressures have resurfaced, with the U.S. Consumer Price Index (CPI) rising unexpectedly in December, pushing the annual inflation rate to 2.9%. This marked a departure from earlier progress in taming price increases. In addition to inflation, geopolitical tensions and fears of a global economic slowdown have also helped to support gold’s renewed upward trajectory.
Moving forward, the Federal Reserve’s stance on interest rates is also a key focal point, as the Fed’s rate decisions can have a big impact on where gold prices head. So, with the first Fed meeting of 2025 on the horizon, the question on many investors’ minds is whether gold’s rally will continue or if headwinds could temper its rise.
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Will gold’s price rise after the January Fed meeting?
Predicting gold’s immediate trajectory following the Federal Reserve’s January meeting is no easy task. After all, the metal’s price is influenced by a complex interplay of factors, with the Fed’s decisions on interest rates playing a pivotal role.
Heading into this meeting, though, most analysts agree that the likelihood of a rate cut remains slim, especially given the recent uptick in inflation. The Fed has also emphasized its commitment to achieving its 2% inflation target, and any signs of backsliding, which is what we saw in December, could prompt a more hawkish stance. This low likelihood of a Fed rate cut is significant for gold because higher interest rates generally increase the opportunity cost of holding non-yielding assets like gold.
That said, gold’s resilience in early 2025 also reflects its role as a hedge against prolonged economic uncertainty and inflationary risks. So, even without a rate cut, gold could benefit from the Fed maintaining its current policy stance, as any hesitation to shift its rate stance may signal concerns about economic growth. Historical patterns support this view, as gold often performs well during periods when the Fed appears cautious or indecisive about future rate changes.
Other dynamics could also shape gold’s path after the Fed meeting. Central banks, particularly in emerging markets, remain major buyers of gold. The recent weakening of the dollar against major currencies has also made gold more attractive to international buyers, further bolstering demand. And, increased demand typically results in higher prices as more buyers enter the market.
So the potential for downward pressure on gold remains. While unlikely at this point, if the Fed were to signal that additional rate hikes are on the table, gold could face headwinds. That type of stance would likely strengthen the dollar and increase the attractiveness of yield-bearing assets, reducing gold’s appeal. And, any unexpected signs of stronger economic growth or a rapid decline in inflation could help diminish the safe-haven demand for gold.
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The bottom line
As the Federal Reserve’s January 2025 meeting approaches, gold’s price outlook remains mixed but promising. A rate cut seems unlikely at this point, but persistent inflation, strong central bank demand and global uncertainties continue to support the metal’s appeal — which could continue to have a positive impact on the price of gold. For investors, gold also remains a reliable hedge and portfolio diversifier, so while short-term fluctuations could happen, long-term trends suggest the metal will continue to hold its value amid today’s economic uncertainties.