Gold prices are currently at $2,648 per ounce, up from $2,607 at the start of last week. The cost of gold increased by over 26% in 2024, one of its highest annual gains this century. The price of gold started the year at $2,076.
Potential Market-Moving News This Week:
- Tuesday, January 7: Job Openings
- Thursday, January 9: Initial Jobless Claims
- Friday, January 10: U.S. Employment Reports
The U.S. jobs report Friday will help shape expectations of the Fed's rate path this year after the U.S. central bank surprised markets last month by reducing its projected cuts given stubborn inflation above 2 percent.
Two Headwinds Against Higher Gold Demand:-
- Bullion is a hedge against inflation and uncertainty, but high rates reduce the appeal of the non-yielding asset. The 10-year Treasury Bond at 4.63% this morning is near a recent high, and the U.S. dollar is the strongest it has been in 2 years.
- The escalations in the Middle East war and the Russia-Ukraine war added to the demand for gold in 2024, and with Trump set to take office in 2 weeks, these two wars may be cooling down or pausing.
Three Factors Potentially Increasing Gold Demand in 2025:
- The central banks continue to stockpile gold reserves. Even China is back to buying gold after a 6-month break from net purchases in 2024 - making purchases in November and December. China ranks as the world's number-one gold consumer.
- President Trump's proposed tariff policies could be inflationary as they would increase the cost of imports. This potential inflation could drive the appeal of safe-haven investments in precious metals like gold, leading to an increase in gold demand.
- Weaker employment numbers may force the hand of the U.S. Federal Reserve to continue to lower interest rates. The Federal Reserve's dual mandate is to promote maximum employment and stable prices.
There is always uncertainty with a presidential transition. While financial markets tend to favor gridlock with a divided Congress and/or Senate - 2025 marks a unique time in American History. Republicans will control all three branches, and the pace of governmental change will likely increase. Gold can add financial stability to any portfolio and has played an increasing role for savvy investors, especially since the U.S. dollar became a fiat currency in August 1971.
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byUnited States Gold Bureau