Gold prices witnessed a significant rise on Thursday, reflecting the positive momentum that has continued since the end of 2024. This rise comes amid expectations of major changes in economic policies under the administration of US President-elect Donald Trump, which are expected to influence the future of the economy and interest rates in the new year.
Gold achieved a significant gain in 2024 of more than 27%, the largest annual gain since 2010. Sharp interest rate cuts by the US Federal Reserve and massive purchases by central banks supported this increase. Geopolitical tensions witnessed in some regions also contributed to raising gold prices to record levels several times over the past year.
Market Movement and Breakout Indicators
Kyle Rodda, a financial markets analyst at Capital.com, attributes the continued rise in gold prices to market movements that show gold is moving in a narrow range. Rodda sees this as a sign that the market is ready for a new breakout. Speaking on the sidelines, Rodda expects the breakout to occur on the upside, which suggests further price gains in the short term.
As 2025 begins, analysts expect gold to continue its upward trajectory. This is mainly due to ongoing geopolitical risks, as well as expectations of rising government debt, due to the expected large fiscal deficit under the new administration of President Trump. Despite potential challenges, such as the slowdown in interest rate cuts by the US Federal Reserve and the strength of the dollar, Rodda expects the market outlook to remain bullish on gold.
In the same context, gold futures recorded a slight increase of 0.2%, reaching $2,646.70 per ounce. This increase is another indication that gold will remain one of the most prominent investment options in the current economic conditions.
The impact of economic policies in the new year
Markets are awaiting US economic data due next week. This data is expected to significantly impact expectations regarding interest rates in 2025, especially considering the tariff policies that President Trump might adopt. Traders expect the Federal Reserve to adopt a slow and cautious approach to cutting interest rates during the new year. Inflation is expected to continue to exceed its 2% target, which reinforces expectations that interest rates will remain high for a longer period.
The US interest rate tracking tool on the Investing Saudi platform shows that expectations indicate only an 11.2% chance of a rate cut next January, reflecting market caution about any rapid changes in monetary policy.
Gold as a safe haven in times of uncertainty
Investors consider gold one of the most prominent safe investment options in times of uncertainty, whether due to geopolitical tensions or local and international economic fluctuations. Investors usually seek gold as a means of preserving the value of their money during periods of turmoil. Although gold benefits from times of uncertainty, it is also negatively affected by rising interest rates. When central banks raise interest rates, return on other investments such as bonds increases.
Details of the movement of gold and the dollar in the first sessions of the year
In the first trading sessions of the new year, spot gold prices witnessed a rise of 0.4%, reaching $ 2,634.88 per ounce. This rise reflects the optimism of the markets towards gold at beginning of the year, which is in line with general trend that prevailed in the last months of 2024. This growth reflects the continuation of the positive momentum witnessed by prices at the end of last year, amid expectations of achieving more gains in the near future.
Other metals and market performance
Among other metals, silver had a strong performance in the first trading session of the new year. Silver rose 1.6% to $29.34 per ounce. This rise came after 2024, which saw silver perform its best since 2020, reflecting optimism in the markets towards other precious metals besides gold. This rise in silver is a response to economic and geopolitical developments that have positively impacted demand for precious metals. As for palladium, it also recorded a 1.1% rise to $913.47 per ounce.
This rise is a positive step for palladium after 2024, which witnessed a slight decline in its value. However, palladium continues to face challenges in the market related to economic fluctuations and industrial demand that greatly affect its value. As for platinum, it rose 0.9% to $918.65 per ounce. Despite this slight increase, platinum has recorded an overall decline in 2024 compared to silver and gold. This decline is due to the decline in industrial demand in some sectors, which negatively affected the performance of the precious metal.
Overall, the performance of other metals at the beginning of the year reflects the diversity in the market, with some metals such as silver and palladium witnessing a significant improvement, while platinum continues to face challenges. This divergence in performance between precious metals shows the ongoing interaction with global economic and geopolitical events.
Gold Outlook
The gold market will likely continue its winning streak in the new year, especially in light of the complex economic conditions. The geopolitical and economic factors affecting this market confirm the importance of gold as a safe haven. With geopolitical tensions increasing and the possibility of rising government debt, gold remains a staple in the portfolios of investors seeking a safe investment.
