Key information
- The price of gold overcame last week’s losses with a notable gain of 5 percent.
- The rally is fueled by investors seeking safety in times of uncertainty due to the escalating conflict in Ukraine.
- Upward momentum may be limited until there is greater clarity on President-elect Trump’s policies and the Federal Reserve’s actions.
The gold market saw a strong rebound this week, ending its three-week decline with a notable 5 percent gain. Spot prices overcame last week’s losses and reached their best rally since October 2023, closing Friday at $2,716.90 (2,511 euros) an ounce. Futures closed at $2,718.20 an ounce.
This resurgence is mainly attributed to the increase in demand for safe haven fueled by the escalation of the conflict in Ukraine. The recent authorization by the United States for Ukraine to use American missiles against Russia has intensified the situation. Despite a stronger dollar, gold’s relative outperformance versus silver suggests this rebound is driven by investors seeking safety in times of uncertainty.
Market Sentiment
Analysts at Saxo Bank believe that continued upside momentum may be limited until clarity emerges regarding President-elect Trump’s policies and the actions of the Federal Reserve. However, they acknowledge that continued bullish sentiment in the market indicates strong conviction in gold’s long-term prospects.
Recent selling pressure is largely due to profit taking by speculators, with evidence of active short selling minimal. Some experts predict consolidation next week, with gold’s moves aligning with both risk-on and risk-off asset classes, a phenomenon attributed to investors’ dual reactions to geopolitical tensions in Ukraine and Russia , while remaining optimistic about a potential de-escalation from President-elect Trump.
Expectations of additional earnings
Prevailing sentiment suggests that gold has potential for further gains due to escalating geopolitical tensions and dovish expectations surrounding the Federal Reserve. A rate cut next month is seen as a possibility, adding to gold’s appeal. Technical indicators indicate a continuation of the upward movement if the price maintains a firm position above $2,700.
Furthermore, economists are closely monitoring the economic data released next week, in order to avoid any volatility in the market. Weak consumer confidence or revised GDP numbers could bolster expectations for a rate cut, while weak inflation data in the core PCE index could further support the Federal Reserve’s easing cycle. Analysts also note that gold’s performance against the euro highlights its true strength, with prices surpassing 2,600 euros an ounce for a gain of 7 percent.
Long-term outlook under Trump’s presidency
Some experts remain skeptical about the long-term economic outlook under President-elect Trump, particularly regarding his monetary policy and its potential impact on the national debt. Despite optimism that a recession can be avoided, concerns persist about the sustainability of such growth fueled by low interest rates and increased government spending.
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