Last Friday, gold prices declined as rising U.S. Treasury yields weakened the appeal of non-yielding assets like gold. With holiday trading quiet, the market focused on the return of President-elect Trump and the impact of his policies on the Federal Reserve's outlook through 2025. Spot gold fell 0.6%, to $2,619.33 an ounce, with a weekly drop of 0.1%. U.S. gold futures settled down 0.8%, at $2,631.90.
U.S. Treasury Yield and Strong Dollar Suppress Gold Prices
Last week, the U.S. 10-year Treasury yield neared its highest level since early May, peaking on Thursday, putting pressure on gold prices. Meanwhile, the dollar index rose for the fourth consecutive week, further diminishing the appeal of gold for holders of other currencies. This year, gold prices have risen 28%, but recent pullbacks reflect market concerns over a high-yield environment.
Long-term Gold Outlook Remains Positive
Despite the Federal Reserve's recent indication of a slower pace of rate cuts, most analysts remain optimistic about gold's trajectory toward 2025. Analysts note that global geopolitical tensions and ongoing gold purchases by central banks will provide long-term support for gold. Additionally, political uncertainty with Trump's return to the White House could enhance gold's appeal as a safe-haven asset.
Divergent Performance of Other Precious Metals
In addition to gold, other precious metals fell last Friday. Spot silver dropped 1.3% to $29.41 an ounce, platinum fell 2.1% to $916.30, and palladium declined 1.2% to $913.71. Price fluctuations of these metals are closely tied to market risk sentiment.
Market Focus
Investors are currently concentrating on policy dynamics following Trump's inauguration in January, particularly any inflationary stimulus measures he might implement and their impact on gold prices. Furthermore, the Fed's future rate cut pace, escalating geopolitical risks, and gold purchasing strategies by central banks will all be crucial factors in determining gold’s path.
Conclusion
While gold faces short-term constraints from rising U.S. Treasury yields and a strong dollar, geopolitical tensions and demand for safe havens may continue to support the gold market in the long run. With ongoing global economic and political uncertainties, gold remains a core asset of interest for investors.
