The U.S. Dollar Index (USDIDX) gains more than 0.3% today, but 10-year US treasury yields fall to 4.53% i.e. by more than 4 basis points, combined with disappointing data from China, bringing continued upward momentum in gold prices into the new year.
- Investors are calculating the risk of a slowdown in China, the increasingly dovish stance of the European Central Bank as well as potential changes in the outlook for future US Federal Reserve interest rates in the context of Trump's ascendancy to power, which, despite the 'base pro-dollar outlook', may ultimately prove to be a positive catalyst for gold prices. Growth in gold (GOLD) today amount to 0.8%, while in the last session of 2024 the metal's prices rose by more than 0.5%.
- This is not insignificantly influenced by political and economic risks, seen especially in China and Europe where the economy is seriously slowing down. This is likely to translate into a dovish position for the ECB and PBoC banks in 2025.
- China's manufacturing PMI data, published tonight, for December indicated 50.5, a reading well below the 51.7 expected and 51.5 in November. For the markets, this means that the People's Bank of China is likely to be forced to take more radical steps to support the economy in 2025 if it is to wake up consumption.
- On the other hand, a certain trend of 'dedollarization' is evident in central banks looking for an asset to store value in the face of a slowdown, or elevated inflation.
- Thus, 2025 is likely to bring few rate cuts in the US (but markets are counting on them almost certainly happening), while Europe and China may loosen policy even more decisively. Long-standing high central bank purchases and rising geopolitical risks are driving gold prices, which have gained 27% y/y in 2024. A repeat of such momentum, in 2025, would drive bullion prices to around $3,000 per ounce.
- Trump's proposed tariffs and protectionist policies are likely to be inflationary and could trigger trade wars. As a result, despite the impact on higher yields, gold may remain important and maintain its upward momentum, finding itself a so-called 'safe haven'. Current high interest rates in the US continue to reduce demand for gold, yet the metal is doing very well.
GOLD (H1 chart)
Looking at the daily interval, the main resistance on GOLD is seen around $2680 - $2710 per ounce (previous price reactions, Fibonacci retracement), the smallest line of resistance in the short-term downtrend. Breaking through this level could open the way for bullion to new historical maximums.
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Source: xStation5
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