Gold is holding at historically high levels as the end of the year approaches. Despite an expected uptick in US inflation figures today, markets remain positive on gold.
Gold has hovered around $2,700 per ounce today, moving above and below as markets waited for the latest CPI figures from the US. This is the first time gold has been at $2,700 since dipping just over two weeks ago and consolidated in a tight range subsequently.
Today’s CPI data release was one of the final potential shock points ahead of next week’s Federal Reserve rate meeting. The figures came in as expected however, with CPI rising annually from 2.6 to 2.7%. Core inflation also remains stubbornly high at 3.3%, the same as last month. Although the drop in US inflation has stalled in recent months, markets are still confident of another rate cut next week, with a 98.1% probability for a 0.25 basis point cut next week according to the CME FedWatch Tool.
Attention will instead turn to 2025, and whether the pace of cuts will continue next year. Incoming President Donald Trump’s policies are expected to be stimulatory, and could see inflation heading higher once more. If so, the Federal Reserve may have to pause on further cuts. The dollar could strengthen in that case, and put pressure on gold for at least the start of the new year.
Events in the Middle East following the downfall of the Assad regime in Syria have also seen some safe haven buying return to the market. The region remains highly unstable and could still have an impact on the wider global economy, particularly if oil supplies become constrained.
China have promised further easing of policy to try and boost the countries ailing economy. They also reported further gold reserve buying after a 6-month pause. China’s central bank buying was a key driver for gold’s rally earlier in the year, and their return to buying is a positive sign for the metal heading into 2025.
Having started the year at $2,000 per ounce, it looks like 2024 is going to remain a truly impressive year of gains for gold, surpassing most forecasts and setting up an exciting 2025.
