Gold traders closely monitor market conditions as economic uncertainty drives demand for the precious metal. Concerns over tariffs, inflation, and slowing economic growth have strengthened gold's appeal as a safe-haven asset. Trade tensions, mainly US tariffs on steel and aluminum, have fueled fears of rising costs and potential recession risks, prompting investors to seek refuge in gold. Additionally, with the Federal Reserve keeping interest rates steady at its recent meeting, the market is looking for four cuts by the end of the year, which will benefit holders of non-yielding assets like gold and further support its price momentum.
Bullish Setup for Short-Term Gold Traders
Gold experienced a remarkable, record-breaking price surge throughout 2024, ending the year with a 27% gain. The gold market has continued its bullish run in 2025, with a YTD return of 15%. In a recent article for Barchart, "Can Gold Keep Climbing? The Shocking Signals Traders Shouldn't Ignore," I described how the first quarter of the year is a bullish period for gold.
Source: Barchart
As we started 2025, gold had a bullish tailwind with interest rates (blue line) decreasing and the US dollar (yellow line) beginning to decline. Add the geopolitical events, tariff wars, the Israel and Hamas conflict, and the Russa and Ukraine conflict, and the gold market has the perfect storm for higher prices.
Source: Barchart
The above chart illustrates the recent first-quarter price strength of the gold market. Now that gold has traded through the psychological resistance price of $3,000, are there any opportunities for short-term traders?
Interest Rates
Source: CME Group
Last week, the Federal Reserve met and, as expected, left interest rates unchanged at 4.25-4.50%. When the news of the meeting results was released, gold immediately rallied $23 per ounce on the June futures contract. At the same time, the market began pricing in 3 more 25-basis-point cuts by the end of 2025.
Lower interest rates impact gold prices primarily by reducing the opportunity cost of holding non-yielding assets like gold. When interest rates decrease, returns on interest-bearing investments such as bonds and savings accounts become less attractive, leading investors to seek alternative stores of value, including gold. Lower rates often weaken the currency, particularly the US dollar, making gold cheaper for foreign investors further driving up demand. Moreover, lower interest rates can signal economic uncertainty or accommodative monetary policy, increasing gold's appeal as a safe-haven asset. As a result, a dovish stance by central banks, particularly expectations of multiple rate cuts, tends to boost gold prices by making it a more attractive investment relative to fixed-income securities.
Seasonal Pattern
Source: Moore Research Center, Inc. (MRCI)
MRCI periodically releases these special seasonal reports on different markets. The upcoming seasonal buy for gold may offer an opportunity for short-term traders looking for a trade lasting approximately two weeks. For Barchart, I wrote an article titled "Gold Surges Past $3,000: A Historic Rally with Risks Traders Can't Ignore," where I described how the gold market still has until mid-April before seasonally it has found weakness and may become a profit-taking period. In the meantime, gold has an impressive track record of closing higher on approximately April 11 than on March 29 for 13 of the past 15 years, an 87% occurrence. Studying the Worst Equity Amount column, we can conclude that 5 of the past 15 years never had a daily closing drawdown, a 33% occurrence rate.
As a crucial reminder, while seasonal patterns can provide valuable insights, they should not be the basis for trading decisions. Traders must consider other technical and fundamental indicators, risk management strategies, and market conditions to make well-informed and balanced trading choices.
Source: Barchart
I've indicated the last five years of this seasonal pattern (green arrow) on the weekly gold chart above. The actual dollar amounts of profit for these trades can be found in the MRCI table above.
Assets to Participate in the Gold Market
In a recent article for Barchart, "Less = More with the New Gold Futures Contract," I discussed multiple available assets, including the new one-ounce futures contract from the CME Group Exchange.
In the past, futures traders could participate in these moves using the standard-size contract (GC) or the micro-size (GR) contract, and equity traders could use the exchange-traded fund (ETF) symbol (GLD). Additionally, investors could purchase physical gold in the spot market.
Retail traders, are you ready for this? On January 13, 2025, the Chicago Mercantile Exchange Group (CME Group) will respond to your request for a more affordable futures contract for trading gold.
The original standard-size gold contract (GC) trades 100 ounces per contract. At the current price for the February futures contract of $2,636 per ounce, the nominal value of the contract is $263,600. The contract requires $11,500 of margin capital per contract traded. Every $1.00 move in the GC contract is worth $100. The 10-day average daily range for the GC is approximately $37, with a nominal movement of $3,700 per day.
The recent micro-size gold contract (GR) addition trades 10 ounces per contract. At the current price of $2,636 per ounce for the February futures contract, the nominal value of the contract is $26,360. The contract requires $1,150 of margin capital per contract traded. Every $1.00 move in the GR contract is worth $10. The 10-day average daily range for the GC is approximately $37, with a nominal movement of $370 per day.
"CME Group's Micro Gold futures products are already among the fastest growing metals products, reaching record levels of participation this year. The average daily volume (ADV) for Micro Gold futures year-to-date is a record 105,000 contracts."
While the GR contract is more affordable than the GC for many traders, there has still been significant demand for a smaller gold contract from the retail trading base.
To answer this request, the CME Group will launch a 1-ounce gold futures contract on January 13, 2025, aimed at the retail client.
Specifications for the new gold contract are:
Contract Size: 1 ounce
Pricing: US dollars and cents per ounce
Tick size: $0.25 (note the GC and GR contracts are $0.10)
Trading symbol: 1OZ
Expiration months: Feb, Apr, Jun, Aug, Oct, & Dec
Settlement method: Cash settled
The features of the 1OZ contract allow traders to track the price of gold more accurately. The 1OZ futures are directly tied to the spot price, offering accurate market exposure.
In Closing…
As gold surges amid economic and geopolitical uncertainty, traders have a unique opportunity to capitalize on the market's momentum. The conditions align for strategic short-term trades with historical seasonal patterns favoring higher prices in early April and the Federal Reserve signaling potential rate cuts. Whether you're an experienced trader or new to gold markets, the availability of futures contracts, ETFs, and physical gold offers a range of ways to participate. By combining technical analysis, fundamental insights, and risk management strategies, traders can position themselves to take advantage of gold's upward trajectory while mitigating potential downside risks.
Now is the time to stay informed, analyze market trends, and make data-driven decisions. The introduction of the 1-ounce gold futures contract by CME Group further lowers the barrier to entry, allowing retail traders to engage with the market more efficiently. As gold prices push past key psychological levels, traders should seize the moment, leveraging the latest tools and market insights to navigate the evolving landscape. Whether you're looking for short-term gains or long-term investing, the gold market presents a compelling opportunity—are you ready to take advantage of it?
