On Friday (January 3), during the Asian session, spot gold prices continued their overnight rally, trading at $2658.94 per ounce, close to the more than two-week high of $2660.34 touched the previous day. On Thursday, gold prices surged by 1.28%, driven by safe-haven demand. Geopolitical tensions and the potential implications of Trump's policies are significant factors fueling the rise in gold prices.
Geopolitical tensions heighten safe-haven sentiment
The escalation of the conflict between Russia and Ukraine has increased market concerns. Ukrainian officials state that Russia used cluster munitions to strike energy facilities, severely hindering repair work. Additionally, administrative buildings in Kyiv were damaged in airstrikes, resulting in casualties. Meanwhile, Russia's Kursk region was also hit by Ukrainian missile attacks, causing widespread damage to civilian facilities.
Tensions in the Middle East are equally high. The Israeli military launched airstrikes on the Gaza Strip and southern Lebanon, causing casualties, including women and children. Israeli Prime Minister Netanyahu approved a delegation to participate in ceasefire negotiations in Qatar regarding Gaza, but mediation is progressing slowly, and the prospect of an agreement remains uncertain.
Economics and policy drive gold price rise
Aside from geopolitical factors, U.S. President-elect Trump's economic policies are a key focus for the market. The market anticipates that Trump's potential tariff policies and trade protection measures add uncertainty while supporting safe-haven demand for gold. Additionally, the trend of rate cuts in 2024 and central bank purchases have driven a long-term gold price increase, with an annual rise of over 27%, the highest since 2010.
The dollar and economic data influence gold trends
Despite the dollar index climbing to a two-year high on the first trading day of 2025, gold prices remain supported by safe-haven sentiment. Traders believe that the dollar's rise is more about market anticipation of the "Trump trade" than an improvement in economic fundamentals. The lower-than-expected U.S. ISM Manufacturing PMI could further boost gold prices. The December ISM data is expected to show manufacturing in a state of contraction, and if the actual data falls short, it could continue to support gold.
Future outlook
The next focus for the gold market is the upcoming U.S. job vacancy data, ADP employment report, and Federal Reserve meeting minutes, which will help the market gauge the interest rate outlook for 2025. Analysts believe that although gold prices may experience consolidation in the short term, geopolitical tensions and economic uncertainty could provide long-term support for gold, potentially pushing prices beyond the $3000 per ounce target.
