Gold climbs to two-week high on safe-haven demand, weaker yields

Early-year corrections could make way for fresh rally in gold, analyst says

By Reuters

Published: Thu 2 Jan 2025, 7:50 PM

Gold hit a two-week high on Thursday, fuelled by safe-haven buying and a dip in US Treasury yields, while the market took out positions ahead of the Federal Reserve’s rate outlook and President-elect Donald Trump’s looming trade tariffs.

Spot gold rose one per cent to $2,649.73 an ounce by 9:47am ET (1446 GMT), hitting its highest since December18. US gold futures gained 0.8 per cent to $2,663.20.

The benchmark US 10-year bond yield slipped, making non-yielding bullion more attractive for investors.

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“I can’t see anything market-moving in the news, but geopolitical forces (international tensions as well as financial uncertainties, not less ahead of the inauguration of President-elect Trump) are supportive,” said StoneX analyst Rhona O’Connell.

Bullion thrives in low-interest-rate environments and acts as a hedge against economic and geopolitical risks.

Russia launched a drone strike on Kyiv early Wednesday, causing damage in at least two districts, while the Israeli military struck a suburb of Gaza City.

Traders await next week’s US job openings data, the ADP employment report, the Fed’s December FOMC meeting minutes, and the US employment report to gauge the interest rate outlook for 2025.

In 2024, rate cuts, central bank buying, and geopolitical tensions drove gold to record highs with a an over 27 per cent annual gain, its best since 2010.

“Corrections or consolidations in the early part of the year could set the stage for a renewed rally,” Fawad Razaqzada, market analyst at Forex.com. said, adding that a gold price target of $3,000 an ounce was feasible.

“The unwinding of the ‘Trump trade’ - a phenomenon characterised by a strong US dollar and robust equity markets - could weaken the dollar and bolster gold prices.”

Trump’s upcoming inauguration on Jan. 20 has heightened uncertainty, with his proposed tariffs and protectionist policies expected to be inflationary, potentially sparking trade wars.

Among other metals, spot silver rose 2.1 per cent to $29.48 an ounce, palladium gained 1.3 per cent to $922.04 and platinum climbed 2.1 per cent at $922.85.