Gold Struggles Amid Profit-Taking Wave Despite Escalating Global Tensions

Precious metals experienced mixed performance on Wednesday, with gold facing downward pressure from profit-taking activity at near-record valuations, even as geopolitical risks continued to support the complex. December Comex gold futures settled marginally lower, declining $2.20 to $4,480.60 per troy ounce—just shy of the previous session’s peak of $4,482.80. However, silver demonstrated greater resilience, advancing 54.60 cents to $71.031 per ounce, marking a fresh record high and extending its four-day winning streak.

The disparity between the two metals underscores a broader market dynamic. Silver has dramatically outpaced gold on a year-to-date basis, posting gains around 130% compared to gold’s approximately 70% surge. Week-over-week, silver climbed 3.4% while gold advanced 2.4%, suggesting increased risk appetite despite macroeconomic headwinds.

U.S. Labor Market Signals Mixed Outlook

Employment data released Wednesday painted an uneven picture of labor market conditions. Initial jobless claims fell by 10,000 to 214,000 for the week ending December 20, while the four-week moving average declined to 216,750. However, continuing claims told a different story, rising for the second consecutive week to 1,923,000—the highest level in three weeks. This divergence could complicate Federal Reserve decision-making as policymakers weigh employment trends against inflation concerns.

Housing market indicators also weakened. The MBA Purchase Index dropped to 169.90 points on December 19 from 176.50 the previous week, suggesting cooling demand in real estate markets.

Geopolitical Tensions Underpin Safe-Haven Demand

The escalating U.S.-Venezuela standoff continues to bolster precious metals pricing. The Trump administration has intensified its approach to Venezuela, imposing a comprehensive naval blockade of sanctioned oil vessels and substantially expanding military presence in the region. After seizing two major oil tankers, U.S. authorities announced plans to add these assets to strategic reserves or market them separately, while the Coast Guard pursues a third vessel in international waters.

Venezuela’s government has rejected these actions, characterizing the blockade as a cover for seizing the nation’s substantial oil reserves. The situation attracted emergency attention at the U.N. Security Council, where most member states urged the U.S. to exercise restraint. Russia and China, both significant stakeholders (particularly as Venezuela’s key oil buyers), condemned the actions, raising concerns about potential escalation given China’s massive demand for Venezuelan crude.

Meanwhile, peace negotiations for the Russia-Ukraine conflict are advancing with Ukrainian President Volodymyr Zelenskyy presenting a newly outlined 20-point framework negotiated with U.S. representatives. The draft has been submitted to Russia for deliberation, with final details expected to emerge from supplementary bilateral agreements focusing on security assurances and reconstruction efforts. The timeline for Russia’s substantive response remains uncertain.

Fed Rate Cut Expectations Continue to Build

Despite divided sentiment among Federal Reserve officials regarding the appropriateness of additional interest rate cuts—balancing inflation concerns against labor market softness—market participants remain convinced of a dovish pivot. The incoming Trump administration’s explicit preference for lower rates, combined with expectations that his Federal Reserve chair nominee will favor monetary accommodation, has strengthened expectations for near-term reductions.

According to CME Group’s FedWatch Tool, markets are currently pricing a 13.3% probability of a 25-basis-point rate cut when the Federal Reserve meets on January 27-28. The expectation of monetary easing, combined with geopolitical uncertainty, has created structural support for precious metals despite tactical selling pressure.

Outlook

The divergence between gold’s modest losses and silver’s record-setting performance reflects how macro forces are reshaping market sentiment. While profit-taking continues to cap upside momentum in gold, underlying fundamentals—characterized by geopolitical volatility, labor market uncertainty, and anticipated monetary accommodation—remain supportive for the precious metals complex. Investors monitoring these cross-currents will likely continue allocating to hedging instruments as 2025 progresses.