Gold outlook: Analyst expects spot prices to test $5,000 psychological mark

Gold hit fresh record high as Dollar weakens amid continuing uncertainty over Greenland

Unexpected eruption of geopolitical worries over Greenland made investors scramble for the safe-haven safety of gold this week. Consequently, the yellow metal hit a fresh record high of $4,888 on January 21.

 

Geopolitical tensions escalated as US President Donald Trump on January 17 threatened eight EU nations with 10 per cent tariffs, which jeopardised the US-EU trade deal. At the same time, a sharp decline in global bonds triggered by mounting fiscal and inflation concerns led to a meltdown in equities as well. However, as Trump, in his speech at the World Economic Forum in Davos, ruled out the use of force to take over Greenland, geopolitical tensions subsided slightly, resulting in a short-lived sell-off in gold and silver.

 

However, the Greenland situation remains fluid. On January 22, the shiny metal rose to a fresh record high of $4,905 as the US dollar weakened amid lingering uncertainty over Greenland.

 

Spot gold, at the time of writing, was changing hands at $4,903, up nearly 1.5 per cent for the day. MCX February gold was at ₹156,029, up 2.07 per cent.

Uncertainty over Greenland lingers

Trump said that he had agreed with NATO Secretary General Mark Rutte on a framework for a future deal on Greenland; however, little is known about the deal. It is said that Trump and Rutte agreed on a two-track approach on Arctic security, which includes negotiations between the US and Denmark on their existing defence treaty and NATO talks on expanding its role in Arctic security.

 

Greenland’s Prime Minister said that they will choose Denmark and were not aware of the concrete content of the deal. He added that while they are willing to have a NATO mission in Greenland, their sovereignty is not negotiable.

 

European officials said that the matter is not settled and that they remain on guard as they expect thorny negotiations ahead.

Data roundup

Data released on January 22 showed that the US economy grew at a 4.4 per cent annualised rate versus the forecast of 4.3 per cent in the third quarter. Initial jobless claims at 200K fell short of the estimate of 209K, while continuing claims were also encouraging. Real personal spending in November at 0.3 per cent matched the estimate.

 

PCE Price Index readings, the Fed's preferred gauge of inflation, were also in line with expectations. The Core PCE Price Index rose 2.8 per cent y-o-y, while it was up 0.16 per cent m-o-m from 0.21 per cent in October. The headline Price Index increased 2.8 per cent and was up 0.2 per cent m-o-m.

Huge volatility in domestic gold and silver prices

 

Both gold and silver continue to exhibit huge volatility and choppiness in the run-up to the budget to be unveiled on February 1, as investors discount and adjust to the possibility of a hike in import duties on precious metals.

Upcoming data and events

Major upcoming US data include S&P Global US PMIs (January 23), University of Michigan sentiment and inflation expectations (January 23), ADP weekly employment change (January 27), Conference Board Consumer Confidence (January 27), and non-farm productivity and unit labour costs (January 29).

 

Japan's national CPI will be released on January 23. CPI is expected to dip to 2.2 per cent in December from 2.9 per cent in January. Nonetheless, it is worth noting that the CPI reading has been above the Bank's target of 2 per cent since July 2021.

 

The Eurozone and UK PMIs will be released on January 23.

 

Major focus will be on the Fed's monetary policy decision due on January 28, wherein the central bank is expected to keep the benchmark overnight Fed funds rate unchanged. As the December payroll report was somewhat encouraging, with US employers adding 50K jobs for the second straight month following a steep loss of 173K jobs in October, and the unemployment rate edging lower from 4.5 per cent to 4.4 per cent, the Fed may lean somewhat hawkish in its monetary policy decision. However, as the drop in the unemployment rate could be due to contraction in the job pool, the job market remains weak.

 

The Bank of Japan will announce its monetary policy decision on January 23. The central bank risks its credibility as it has not been able to rein in inflation for years altogether.

Gold ETF and COMEX inventory

Total known gold ETF holdings surged to a fresh cycle high of 99.81 MOz as of January 21 and are up nearly 27 tons, or 1 per cent, YTD.

 

Registered COMEX gold inventory at 18.86 MOz is around 22 per cent lower than its record peak of 24.25 MOz noted on April 7, 2025.

COMEX gold delivery

Investors continue to prefer taking hold of physical metal. On January 21, 1,651 units of gold were delivered, the highest since December 30.

Polish central bank plans to add 150 tons of gold to its reserves

Poland’s central bank, the world’s biggest reported buyer of gold in 2025, is planning to boost gold purchases by another 150 tons to 700 tons amid geopolitical instability. Poland doesn’t have a deadline to reach its newly stipulated gold holding target, which would cost more than $23 billion.

US dollar index and yields

The US Dollar Index fell in the wake of the ‘Sell America’ trade in light of the Greenland issue and surging yields. The index rebounded on January 21 as Trump walked back on Greenland; however, it resumed its slide on January 22. At the time of writing this article, the index was hovering around 98.35, down nearly 0.4 per cent for the day and 1.1 per cent for the week.

 

After a brief respite on January 21, two-year bonds fell again on Thursday and were quoting at 3.61 per cent, the highest since November 5. Ten-year yields at 4.24 per cent were largely flat, though earlier yields shot up to 4.31 per cent, the highest since August 26.

Outlook

Spot gold will continue to draw support from safe-haven buying amid elevated geopolitical tensions as Greenland uncertainty continues. Gold is likely to test psychological resistance at $5,000 and may rise further to test $5,120 resistance. Support is at $4,750/$4,720.

 

A convincing thaw in geopolitical worries will weigh on the metal; thus, it runs headline risk. Domestic gold prices could be volatile due to import duty speculation.

 

(Disclaimer: Praveen Singh,  head currencies and commodities at Mirae Asset Sharekhan. Views expressed are his own.)