On Thursday, spot gold plunged during the session, falling back to around $2,680/ounce, down more than 1% on the day. Spot silver also fell more than 1% on the day. Earlier, the US November PPI report exceeded expectations, with a monthly rate of 0.4%, expected to be 0.2%, and the previous value revised from 0.20% to 0.3%; the annual rate was 3%, far exceeding the expected 2.6%, and the previous value revised from 2.4% to 2.6%.
Despite this, the market still has overwhelming expectations for the Fed to cut interest rates in December. In addition, the unexpected increase in the number of initial jobless claims in the United States last week also offset doubts about the Fed's prospects for rate cuts.
However, independent analyst Ross Norman warned that we might see profit-taking among gold traders after the metal’s sharp gains so far this year.
The World Gold Council also said on Thursday that gold prices will rise more slowly in 2025 after hitting a record high this year.
Gold prices have risen more than 30% so far in 2024, but gains next year could be tempered by variables such as economic growth and inflation, according to the World Gold Council. A possible trade war and a complicated interest rate outlook during a second term for U.S. President-elect Donald Trump could weigh on growth and hurt demand from investors and consumers, the industry association said in its 2025 outlook released Thursday.
"All eyes are on the United States. A second Trump term could boost the local economy, but it could also cause a fair degree of nervousness among global investors," the report said.
Gold's rebound in early 2024 was driven by massive purchases by central banks, especially the People's Bank of China and other central banks in emerging market countries. Combined with the Federal Reserve's recent monetary easing, and safe-haven demand triggered by rising geopolitical tensions in the Middle East and Ukraine, gold prices were further boosted. However, gold's gains stalled as the dollar rebounded after Trump won the election.
Some investment banks remain bullish on gold's prospects for next year, with the metal currently trading near $2,700 an ounce. Goldman Sachs Group Inc. predicts that gold will reach $3,000 by the end of 2025, while UBS Group AG predicts $2,900.
China’s actions in the gold market will be closely watched. The World Gold Council said investors in the Asian country have so far supported prices while consumers remain on the sidelines, but “these dynamics depend on the direct (and indirect) impacts of trade, economic stimulus and risk perceptions”.
The association said gold would rise if the world saw "significantly lower interest rates, or a deterioration in geopolitical or financial market conditions." Lower interest rates are generally good for gold because it doesn't pay interest.
“Gold’s ultimate price performance will depend on the interplay of four key drivers: economic expansion; risk sentiment; opportunity cost; and momentum,” the report states.
Article forwarded from: Jinshi Data
