Gold price surges as investors seek safe-haven assets in light of ongoing economic uncertainty and the impending release of US jobs data.
Gold (XAU/USD) increased by 0.31%, reaching a four-week high on Thursday, driven by safe-haven demand as investors grapple with uncertainties surrounding the economic and inflationary effects of US President-elect Donald Trump's policies.
"Safe-haven demand is modestly supporting gold, counterbalancing the downward pressure from a stronger dollar and rising interest rates. Market uncertainty is likely to persist with Donald Trump’s upcoming inauguration," stated UBS analyst Giovanni Staunovo.
Trump will assume office on January 20, and his proposed tariffs could potentially ignite trade wars and exacerbate inflationary pressures. Such a scenario could create a favorable environment for gold, which traditionally performs well during economic instability and rising prices.
The Federal Reserve is already assessing the risks associated with Trump’s potential policies and appears poised to adopt a cautious approach regarding further rate cuts. Recent meeting minutes indicated that officials acknowledged the possibility that changes in trade and immigration policy could prolong the disinflationary process. If the Fed maintains its current interest rate within the 4.25% – 4.5% range for an extended period, any rise in XAU/USD may be slow and volatile.
XAU/USD demonstrated upward movement during the Asian and early European trading sessions. Today, the market's attention is on the US nonfarm payroll (NFP) report scheduled for 1:30 p.m. UTC. A Reuters survey suggests that the US economy likely added 160,000 jobs in December. A lower-than-expected figure and a slower rise in average hourly earnings could lead the Fed to adopt a less cautious stance on easing rates this year, potentially driving XAU/USD higher. Conversely, a stronger-than-anticipated increase in NFP figures and robust earnings data may push XAU/USD below $2,650.
On Thursday, the euro (EUR/USD) fell by 0.19% against the US dollar (USD), as the dollar strengthened amid concerns over tariffs under the incoming Trump administration.
Several Federal Reserve officials articulated their views on US monetary policy yesterday. Susan Collins, President of the Boston Fed, emphasized the need for caution given the significant uncertainty in the economic outlook. Patrick Harker, President of the Philadelphia Fed, stated that while he anticipates rate cuts, there is no immediate need for action. Jeff Schmid, Kansas City Fed President, suggested that rates are near a neutral level for the economy.
This signals that the Fed may pursue a less dovish monetary policy in 2025 compared to 2024, exerting upward pressure on the US Dollar Index (DXY) and dragging other currencies down. Meanwhile, economic conditions in the Eurozone are deteriorating, with recent data showing a 3.5% decline in German exports, the largest economy in the Eurozone.
EUR/USD is trending down during the Asian and early European sessions. Today's focus remains on US macroeconomic data, including the NFP report at 1:30 p.m. UTC and the preliminary consumer sentiment report at 3:00 p.m. UTC. Stronger-than-expected data could push EUR/USD towards multi-month lows below 1.02600, while weaker data may provide temporary relief for euro bulls, pushing EUR/USD above 1.03500.
Bitcoin (BTC/USD) fell by 2.62% as yields on US Treasury securities reached their highest levels in a year, leading to a decline in risk assets amid uncertainty surrounding potential tariffs under the new administration.
After a strong start to January, driven by optimism surrounding the "Trump trades," sentiment quickly shifted as US bond yields increased, reversing the early gains in digital assets and stocks. Historically, Bitcoin has shown a negative correlation with US interest rates.
Eloisa Cadenas, Chief Innovation Officer at Monetae Exchange, noted that markets like Bitcoin thrive on liquidity to fuel growth, but rising interest rates diminish global liquidity, making traditional instruments like bonds more appealing. Bitcoin struggled to maintain levels above $100,000, declining approximately 6% over the past 30 days to a support level of $92,000, with other digital currencies experiencing even greater declines.
While rate cuts typically encourage investment in higher-risk assets, the Fed's cautious approach to monetary policy has increased market volatility. Although three rate reductions occurred in 2024, the Fed signaled that future easing will be slower than expected.
With the upcoming US nonfarm payroll data release and declining global interest rates, market volatility in digital assets is likely to increase. The political climate under the Trump administration could prove favorable for the cryptocurrency sector; however, concerns about the budget deficit and potential trade disputes may hinder economic growth, leaving risk-averse investors uncertain.
BTC/USD showed bullish movement during Asian and early European trading hours, reaching local resistance at $94,000. Today's market awaits the US nonfarm payroll report at 1:30 p.m. UTC, with analysts forecasting the addition of 164,000 jobs in December. A stronger-than-expected figure may trigger further bearish corrections in Bitcoin, while softer data could push BTC/USD higher.
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