Dollar Strength and Economic Uncertainty Keep Gold Price Relatively Stable as Tensions Mount

Gold maintained a near-flat trajectory on Thursday despite mounting geopolitical pressures and shifting U.S. economic signals, as the strengthening dollar continued to weigh on precious metals demand. January-delivery gold futures on Comex traded marginally higher, adding just 40 cents to reach $4,449.70 per troy ounce, representing a minimal 0.01% uptick. By contrast, silver experienced a sharper decline, with January contracts sliding $2.4190 (3.14%) to close at $74.716 per troy ounce, signaling divergent sentiment between the two precious metals.

Labor Market Shows Mixed Signals While Dollar Powers Higher

Thursday’s employment data painted a nuanced picture of the U.S. job market. Challenger, Gray and Christmas reported that December 2025 saw 35,553 announced job cuts from U.S. employers—a significant pullback from November’s 71,321 reductions. Yet the broader 2025 employment narrative tells a concerning story: the year recorded 1,206,374 total job cuts, marking a substantial 58% surge compared to 2024, with technology companies bearing the heaviest burden at 154,445 layoffs.

Initial jobless claims climbed by 8,000 to 208,000 for the week ending January 3, aligning with market forecasts. The four-week moving average improved slightly to 211,000 from the previous week’s 219,000, though continuing claims jumped to 1,914,000 from 1,858,000, indicating persistent labor market strain.

Meanwhile, the U.S. dollar index strengthened to 98.93, up 0.25 points (0.25%), benefiting from safe-haven demand and expectations of sustained higher interest rates. The dollar’s rally typically constrains gold prices by making the precious metal more expensive for international buyers.

Monetary Policy Expectations Remain Hawkish

Market participants are closely monitoring tomorrow’s nonfarm payrolls report, a key indicator that traditionally influences Federal Reserve policy direction. Current expectations suggest minimal probability of immediate rate cuts, with CME Group’s FedWatch Tool showing investors pricing in only an 11.6% chance of a 25-basis-point reduction at the Fed’s January 27-28 meeting—a stance supporting the dollar’s strength.

Geopolitical Tensions Escalate Across Multiple Fronts

Escalating global tensions continue to underpin safe-haven demand for gold price movements. U.S. legislators have advanced a bill granting President Trump authority to impose tariffs on nations purchasing Russian oil, with countries including China, India, and Brazil facing potential 500% duties if the legislation passes voting next week. This initiative reflects ongoing Western efforts to economically isolate Russia amid its continued conflict in Ukraine.

In a significant diplomatic development, the U.K. and France have signaled readiness to deploy ground troops in Ukraine following a potential ceasefire. Russia has countered by warning that any Western military presence would constitute “legitimate combat targets,” escalating rhetoric and uncertainty.

Additional pressure points include unrest in Iran stemming from economic mismanagement and currency depreciation, where Trump has warned of potential U.S. intervention. The capture of Venezuelan President Nicolas Maduro has prompted Trump to assert U.S. interest in Venezuela’s oil resources, adding another layer of geopolitical complexity.

China’s Steady Gold Accumulation Continues

Supporting underlying gold demand, People’s Bank of China data revealed that the central bank extended its gold purchasing streak to fourteen consecutive months. Chinese gold holdings reached 74.15 million fine troy ounces in December, marginally up from 74.12 million in November, with reserves now valued at $319.45 billion. This sustained accumulation by a major economy underscores persistent central bank appetite for the precious metal as a strategic reserve asset.

As commodity indices undergo their annual resetting process over the coming days, traders have adopted a cautious stance, waiting for adjustment announcements before establishing new positions.