After a volatile few days that saw gold push to further new all-time highs in GBP, gold has now pulled back slightly, but settled in near the record.

A weakening pound last week helped propel gold to a 3.7% gain which saw the metal break past £2,200 per ounce for the first time. Monday saw gold climb to a current UK record of £2,221.41 per ounce, an exceptional feat considering it was at £1,600 the same time in 2024. Currently, it has settled in around £2190, trading in a range of around £10 above and below this level.

140125 GBP Chart

Bond yields and the pound have stabilised somewhat today, but Chancellor Rachel Reeves remains under pressure to reassure markets that government spending is under control whilst promoting growth in the UK economy. Having fallen as low as $1.2103 so far, it may not take much to prompt a further sell-off in sterling.

Bonds globally have seen higher yields of course, even if the problem has been more intense in the UK, and the US dollar index remains at its highest since October 2022. Rate cut expectations in the US have been slashed in recent weeks, with no cuts currently predicted until the summer according to the CME FedWatch Tool.

Tomorrow will see the latest US CPI figures released, and after the volatility in bond and currency markets over the past week, it will likely come under extra scrutiny. Reactions to CPI reports of late have been extreme, and tomorrow’s report will almost certainly be similar. If it suggests inflation remains high, it could further cement the opinion that rates will not be cut as much in 2025, lending further strength to the dollar, and putting some pressure on gold in USD. If this further weakens the pound however, then gold in GBP could remain close to the current level.

Markets are also anxiously awaiting the return of Donald Trump to the White House next week. After several weeks and months of rhetoric over trade tariffs, the war in Ukraine, and claims over Canada, Greenland and the Panama Canal, January 20th will mark the first opportunity for President Trump to put policy behind his words. Next week therefore has the potential for further volatility in either direction.

For UK investors however, gold continues to see higher highs, and higher lows, with each dip seemingly creating a new floor for the metal to push higher from.