Gold in demand as new year begins

I hope that 2025 is a healthy, happy and successful year for all readers. Perhaps it will even be another “golden year”. The prospects are reasonable, although many market players see more upside potential for prices in the second half of the year. 

Gold rallies despite rising bond yields and strong dollar

There was a strong headwind for gold prices at the beginning of the year in the form of a sharp rise in government bond yields resulting from investor concerns about continued high inflation (also due to the many comments by President-elect Trump on the subject) and increasing government debt in many countries. This mainly affected the US and the UK. The yields on 10-year Treasuries in the US passed the 4.7 percent mark, while those on their 30-year counterparts rose as far as 4.95 percent – not far from the 5 percent mark. In the UK, 30-year Gilt yields temporarily climbed as high as 5.37 percent yesterday for the first time since 1998.

The sharp increase in US yields gave a tailwind to the US dollar, which reached a 25-month high against the euro, for instance, of USD 1.0240 per euro. High yields and a strong US dollar have often hampered the gold price in the past. However, the current price level seems to have aroused an interest in Asia and among central banks in buying the precious metal. From a macroeconomic point of view, the price of gold should actually have fallen over the past few days, whereas it has moderately increased. This may have been due in part to the search for “safe havens” in uncertain times, as investors are waiting with bated breath for the first resolutions of the new US government which will take office on 20 January. 

On Thursday three weeks ago (19 December), gold traded at USD 2,610 per ounce, and it closed the year at USD 2,624 per ounce. The gold price has fluctuated since the beginning of the new year, albeit in a limited range. The highest it has reached in the past three weeks was around USD 2,670 per ounce yesterday. This morning it was trading a little lower at USD 2,665 per ounce, which is 1.5 percent higher than at the beginning of the year.

Gold price benefits from weaker euro

The Xetra-Gold price also benefited from the depreciation of the euro against the US dollar. During normal trading hours, it initially dipped from EUR 80.85 per gram on 19 December, to EUR 80.70 per gram at the close of the year. However, by 2 January, it had reached the highest price in three weeks, EUR 83.35 per gram, helped by the marked decline in the euro versus the US dollar. Xetra-Gold was trading at around EUR 83.30 per gram yesterday – following a temporary drop – and is likely to start trading not far from that price today at EUR 83.20 per gram. 

Wait-and-see approach in advance of change of US government

Tomorrow the focus will be on December’s US labour market data, and next Wednesday on US consumer price data. By and large, however, the markets are waiting with bated breath for the new US administration and its trading and tariff policies. 

I wish all readers a sunny – albeit cold – and relaxing weekend.