Gold prices witnessed a noticeable increase on Tuesday, rising in light trading during a shortened week due to holidays. The market was awaiting future economic policies, including decisions related to tariffs that US President-elect Donald Trump intends to implement. Investors are also cautiously following the expected path of interest rate cuts by the Federal Reserve next year. These factors combined have been affecting global markets and have pushed gold prices significantly.
In December, the Federal Reserve continued to reduce interest rates after a period of intensive rate hikes. However, it indicated that the pace of interest rate cuts may be reduced in 2025. Investors are currently focusing on the pace at which the US central bank will reduce interest rates over the next year. Higher interest rates reduce the appeal of non-yielding XAU.
In addition, US inflation data helped ease some concerns. A moderate reading for inflation, announced on Friday, spread a sense of calm among investors regarding the pace of interest rate cuts. But markets are still pricing in only about 35 basis points of easing in 2025, reflecting ongoing investor concerns about future policy. This potential slowdown in cuts is prompting investors to consider alternative investment options such as XAU, which is considered a safe haven.
Tariffs and their impact on markets
On the other hand, the chief market analyst for the Asia-Pacific region focused on the importance of the policies that President-elect Donald Trump intends to implement. Wong said that “the next thing that the market will focus on is the tariff policy that Trump intends to implement and how the targeted trading partners will respond to it.” He believes that tariffs are usually used as a negotiating tool, as the president-elect may use them to force trading partners to accept certain terms.
Moving to 2025: Important economic changes
Many analysts expect 2025 to be a year of major changes in US economic policies. Investors are preparing for a wave of economic changes, including tariffs, deregulation, and new tax policies. These changes will have a significant impact on financial markets as Trump enters the White House in January.
On the other hand, gold has seen record levels this year, rising 27% so far, achieving its best annual performance since 2010. This rise was driven by several key factors. First, there were strong purchases by central banks around the world seeking to boost their gold reserves. Second, ongoing geopolitical tensions, such as trade disputes and political challenges in several regions, contributed to increased demand for gold as a risk hedge.
Geopolitical Influences on Gold and Markets
Geopolitical tensions are a major factor influencing gold prices. Gold is closely linked to market uncertainty. In the event of major risks at the regional and international levels, investors resort to XAU to protect their investments from volatility. This is what we are currently witnessing, as trade disputes between the United States and China, in addition to political crises in some Middle Eastern countries, may lead to severe volatility in the markets.
Despite expectations of a slowdown in the pace of interest rate cuts by the Federal Reserve, political and economic instability may make gold maintain its attractiveness. In this context, experts indicate that XAU may continue to perform well in the coming years if geopolitical and economic conditions continue to present challenges to the markets.
Gold purchases by central banks
One of the important factors that helped boost the price of gold this year is the massive purchases by central banks. Many central banks around the world continue to buy large amounts of gold as part of their reserve strategies.
Gold versus traditional investments
Not only has gold outperformed economic and geopolitical tensions, but it has also outperformed many other traditional investments such as global stocks and XAU. This year, XAU has performed exceptionally well compared to many other asset classes. While global stocks have seen some declines and volatility, XAU has shown great resilience in the face of these challenges, prompting many investors to shift their investments towards the precious metal.
Gold Future in 2025
As we approach 2025, gold remains in a strong position thanks to a variety of factors affecting it. Investors are expected to continue using XAU as a safe haven amid volatile economic and geopolitical situations. Additionally, if interest rates continue to decline and financial markets do not witness rapid stability, gold is likely to maintain its appeal in the coming years. Given Trump’s upcoming policies, it will be interesting to watch how changes in US policies will impact gold markets.
Gold at Settlement: Dollar Strength Affected by Weak Trading
Gold prices deepened their losses to close the first trading session of the week with a significant decline. This came amid support from the US dollar, with trading volumes declining due to holidays as the year-end approaches.
At the close of trading, XAU futures for February 2025 delivery fell 0.6%, or $15.7, to $2,628.20 per ounce. Gold had ended last week’s trading with losses of 1.1%, reflecting the continued negative pressures on the precious metal in light of the current global economic conditions.
Gold Now: Slight Price Recovery
Despite the losses witnessed by gold in yesterday’s trading, spot prices witnessed a slight recovery. Spot XAU rose 0.3% to $2,620 per ounce, reflecting some recovery after the sharp decline in previous sessions. In contrast, gold futures for February 2025 delivery witnessed a slight increase of 0.2% to $2,633 per ounce.
Other Precious Metals Rise
In addition to gold, some other precious metals saw modest price increases. Spot silver rose 0.1% to $29.68 per ounce, while palladium gained 0.6% to $935.21 per ounce. Platinum also rose 0.2% to $941.28 per ounce. These gains in other metals suggest similar moves to those in gold, with some precious metals responding positively to overall market movements.
Gold Outlook
Despite the slight improvement in gold in recent hours, the market remains under pressure from macroeconomic factors, such as the strength of the dollar and expectations of future US interest rate hikes. Continued cash flows into the US dollar also enhance its appeal as a safe haven compared to gold. At the same time, the continued uncertainty in markets due to holidays and reduced trading volumes could contribute to continued price volatility in the near term. Investors are awaiting major economic developments in the coming days, such as the future monetary policies of the US Federal Reserve, as well as shifts in other commodity markets that may affect the movement of gold prices.
