Gold didn’t experience a Christmas rally for the first time in years but still saw its price rise by 26% at the end of 2024. Even with the strengthening of the U.S. dollar and rising bond yields, the metal’s price continues to move closer to $2700.
Analysts expect that the precious metal’s break from its conventional relationship with bond yields and the dollar will be a primary theme this year. Already, gold has recorded new highs against the euro and British pound.
They note that investors are less worried about the higher opportunity costs for holding the metal and more focused on hedging against geopolitical turmoil, economic uncertainty and increasing inflation risks.
However, analysts also warn of possible volatility as gold remains stuck in a continual struggle between its safe haven appeal and rates of interest. In its final 2024 meeting, the Federal Reserve signaled that it’d reduce rates of interest only twice in the new year. A few months before, the committee was anticipating 4 rate cuts.
In the last week though, minutes from a recent monetary policy meeting have surfaced indicating that these rates may soon near a neutral level. This has increased concerns among investors whether equity markets will be able to sustain their rally if rates of interest remain high. Concurrently, will the economy stay strong with high costs of borrowing?
This has seen central bankers and international investors dominate the marketplace as Western investors continue to ignore the precious metal.
In particular, commodity analysts expect consumers in China to increase investments in gold to protect their wealth from volatility in equity markets and a weakening yuan. This comes after the People’s Bank of China resumed gold purchases after a 6-month pause. Data from the bank’s reserves shows that last month, it bought 10 tons of gold, an increase from the 5 tons it purchased the previous month.
In addition to this, analysts expect central banks in emerging markets are expected to continue diversifying away from the dollar and purchasing more gold as a way to protect themselves from geopolitical instability. This is as incoming president Donald Trump continues weaponizing the American economy, threatening tariffs on both the country’s adversaries and allies.
Looking past the possible volatility, some analysts also anticipate the price of gold to increase to $3000 per ounce. However, despite a strong start to the year, prices aren’t expected to surge significantly until the second half of the year.
All eyes will be on firms like Eloro Resources Ltd. (TSX: ELO) (OTCQX: ELRRF) as investors monitor how the changing trajectory of the gold market impacts gold stocks.
NOTE TO INVESTORS: The latest news and updates relating to Eloro Resources Ltd. (TSX: ELO) (OTCQX: ELRRF) are available in the company’s newsroom at http://ibn.fm/ELRRF
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