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Gold prices inched higher in Asian trading on Thursday, building on their robust performance in 2024 as a softer U.S. dollar lent support. However, investor caution lingered due to the U.S. Federal Reserve’s indications of fewer interest rate cuts in 2025.
Spot gold rose by 0.3% to $2,632.82 per ounce, while February gold futures edged up 0.1% to $2,644.47 an ounce during early trade.
Gold concluded 2024 with a remarkable 27% annual gain, the highest since 2010. The increase was largely driven by the Federal Reserve’s aggressive rate cuts and geopolitical uncertainties, which bolstered demand for the precious metal as a safe-haven asset. Low interest rates have historically decreased the opportunity cost of holding gold, prompting investors to shift capital into the metal as a hedge against economic and political instability.
Despite its strong annual performance, gold faced headwinds following the Fed’s December meeting. The central bank signaled only two more rate cuts in 2025, curbing market enthusiasm and causing gold prices to decline. Since then, the market has exhibited muted movements, reflecting a cautious outlook for the coming year.
The U.S. dollar, meanwhile, weakened by 0.2% during Asian trading on Thursday, though it remained near its two-year peak. Expectations of limited rate cuts in 2025 have strengthened the dollar, adding pressure on gold prices by making the metal more expensive for holders of other currencies.
Other precious metals saw gains, with platinum futures rising 0.7% to $916.65 an ounce and silver futures climbing 1.6% to $29.715 an ounce.
Industrial Metals Supported by Dollar Weakness and Chinese Data
Industrial metals, including copper, also benefited from the weaker dollar. Copper prices rose on Thursday, supported by monthly Chinese factory activity data that indicated growth, albeit at a slower pace than anticipated.
The Caixin Manufacturing PMI data for December suggested diminishing impacts of recent stimulus measures in China, leaving markets awaiting further clarity on Beijing’s policy direction for 2025. The Chinese government has hinted at adopting a looser monetary policy in the coming year to support economic growth.
Benchmark copper futures on the London Metal Exchange advanced 0.9% to $8,863.50 per ton, while February copper futures increased 0.7% to $4.0492 per pound.
As markets weigh the Federal Reserve’s monetary policy stance and China’s economic trajectory, gold and industrial metals remain closely tied to macroeconomic developments, with investor sentiment shaped by geopolitical and economic uncertainties heading into 2025.
