Price of gold today has risen sharply, reaching $2,715.81 per ounce as of November 23, 2024, the surge of gold price represents the largest weekly increase in nearly two years and is driven by escalating geopolitical tensions.
The yellow metal closed the session up 2% at $2,608 per ounce, recovering from a two-month low, as Goldman Sachs reaffirmed its $3,000 price target.
While the markets anticipate that the Federal Reserve will lower interest rates in December, Donald Trump’s inflationary policies constrain the potential for monetary policy easing in 2025.
Trump’s policies are expected to fuel inflation and restrict the Federal Reserve's ability to lower interest rates, leading to a pullback in the dollar index (DX) following a post-Trump rally on Monday. This was driven by uncertainty surrounding his cabinet choices. A rise in the 10-year Treasury yield, which tends to indicate expectations of higher interest rates, suggests that investors are adjusting their outlook away from a more dovish Fed stance.
Despite a general market uptick from Trump-related trades, recent controversial nominations have created uncertainty, particularly regarding the Treasury position that influences U.S. government debt, tax policy, and the dollar. If Trump’s fiscal plans favoring growth and inflation receive support, it could strengthen the dollar and put downward pressure on gold prices.
However, Trump has previously advocated for a weaker dollar, raising speculation about potential capital controls and increased intervention with the Fed. A less likely scenario would involve a more aggressive monetary policy, such as printing more money.
While a short-term strengthening of the dollar might be challenging, Trump's past tariffs post-2016 indicate a tendency towards a weaker dollar. His protectionist measures are expected to increase demand for gold as global trade faces potential disruptions.
President Joe Biden's recent decision to allow Ukraine to use Army Tactical Missile Systems (ATACMS) for strikes up to 190 miles into Russian territory has shifted the geopolitical landscape. This decision followed reports of North Korean troops being deployed at Kursk.
The escalation of tensions between Russia and the West comes just as Trump promises to end the conflict shortly after his inauguration in January 2025. This represents a significant shift in U.S. policy, which has been criticized by Russia as placing NATO in a precarious position.
Increased tensions are seen as a catalyst for gold prices, which received support from a weaker dollar on Monday. Some market analysts, like Daniel Pavilonis from RJO Futures, believe that gold is poised for further gains regardless of Federal Reserve rate cuts.
Recent U.S. data showed a decrease in the probability of a December interest rate cut, dropping from 65% a week earlier to about 58% as of November 19. Fed Chair Jerome Powell indicated that with growth and inflation remaining above target levels, there is little urgency for rate cuts at the previously expected pace.
BofA Global Research strategists note that economic growth could vary significantly depending on whether the incoming administration pursues fiscal easing and deregulation or opts for tariffs, which could trigger a trade war. Previous tariffs on China have historically raised market anxiety, contributing to higher gold prices.
Overall, Goldman Sachs has maintained its $3,000 per ounce price target for gold in 2025, anticipating that the Fed will eventually cut rates and that central bank demand will rise under Trump. With North Korean troops aiding Russian forces, the potential for price increases in gold remains, especially with escalating tensions in the Middle East.
Citi has also projected a similar price target for gold over the next six to twelve months. However, in the near term, Fitch Solutions' BMI sees significant downside risk for gold prices, predicting a drop to $2,375 in 2024.
Matthew Jones, a precious metals analyst at Solomon Global, expects macroeconomic conditions to support gold prices.
As uncertainty grows due to President Biden's approval of missile systems for Ukraine and President-elect Trump's cabinet nominations, gold prices rebounded on Monday. While short-term risks exist amid a stronger dollar, analysts from Goldman Sachs and Citi project rising gold prices driven by safe-haven demand towards $3,000.
Despite the uncertainty surrounding Trump’s final choices and policies, interest rates, and geopolitical tensions, the potential for gold to increase remains. Traders should remain cautious about the implications of a rising dollar.
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Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.
