Gold rises on safe-haven demand

Gold prices continued to gain strength on Thursday, rising from $2,620 to $2,660 per ounce. If gold prices rise, they may encounter resistance at $2,664 per ounce, while if gold prices decline, support may be encountered near $2,596 per ounce. 

Markets were quiet on New Year's Day with light trading volumes and very few fundamentals coming up this week. Gold prices continue to rise this week even as the rivaling dollar gains strength. Gold prices are gaining a bullish momentum, fueled by safe-haven demand as Trump’s proposed trade tariffs are driving investors towards safe assets. 

Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar continued to gain strength on Thursday, and the dollar index rose from 108.5 to 109.3, its highest value since October 2022. US treasury yields remained steady on Thursday, with the US 10-year bond yielding 4.57%.      

Gold prices are supported by increased Fed rate cut expectations. The US Federal Reserve cut interest rates by 25 basis points at its latest meeting to a target range of 4.25% to 4.50%. Fed Chair Jerome Powell delivered a hawkish speech after the meeting, emphasizing the need to be cautious about further rate cuts. Powell stated that the Fed’s approach will remain data-driven and hinted that the pace of future rate cuts will be slower. 

In addition, the Fed’s updated dot plot was more hawkish than anticipated, bringing down expectations of future rate cuts. The Fed’s latest dot plot indicated that only two rate cuts will take place in 2025, down from four projected in September. 

Safe-haven demand remains high, due to uncertainty in the Middle East, boosting gold prices. The civil war in Syria has been rekindled, further destabilizing the region. Tensions between Israel and Lebanon have cooled after the ceasefire deal, but hostilities between Israel and Hamas continue in the Gaza area. Meanwhile, the situation between Russia and Ukraine remains critical.

TRADE GOLD

The content provided in this material and/or any other material that this content is referred to, whether it comes from a third party or not, is for information purposes only and shall not be considered as a recommendation and/or investment advice and/or investment research and/or suggestions for performing any actions with financial products or instruments, or to participate in any particular trading strategy and cannot guarantee any profits. Past performance does not constitute a reliable indicator of future results. TopFX does not represent that the material provided here is accurate, current, or complete and therefore shouldn't be relied upon as such. This material does not take into account the reader's financial situation or investment objectives. We advise any readers of this content to seek their own advice. Without the approval of TopFX, no reproduction or redistribution of the information provided herein is permitted.

Written by:
Myrsini Giannouli

Share the article: