(Kitco Commentary) – In a move likely to pique the interest of those keeping a keen eye on economics, the People’s Bank of China (PBOC) boosted its gold reserves to 73.3 million ounces in December 2024, after a modest rise from 73 million ounces in November. With two successive months of increase following a pause, it seems the PBOC is renewing its trust in gold as a staple of its strategic reserves. For more on the topic, you might peruse through resources detailing PBOC’s gold strategy.
Recent appointments show gold’s mettle in turbulent times. Interestingly enough, gold dipped to $2,598.10 on the 24th of December yet rebounded to a respectable $2,664.40. Notably, this 0.66% increase occurred despite the significant fortification of the U.S. dollar. The currency appreciated by 0.40%, hitting a level of 108.776 on the dollar index.
Turning our attention to the movement of financial markets, one notices the impressive 27% gain in gold throughout 2024. This success is largely credited to the anticipation of dwindling interest rates and bullish demand from various central banks and investment funds. However, recent dynamics have thrown a spanner in the works. With the Federal Reserve hinting towards a more cautious plan for rate cuts and the dollar gaining strength post-U.S. elections, gold’s momentum found itself slightly curbed.
Market participants have now shifted their gaze to eagerly awaited economic indicators. Amongst these are the critical reports scheduled for Wednesday and the U.S. Labor Department’s impending non-farm payroll data on Friday. Significantly, analysts will pore over the Federal Reserve’s minutes with bated breath for any policy clues. According to the CME’s FedWatch tool, there’s a staggering 95.2% likelihood that the Federal Reserve will hold its current rate between 4.25% to 4.50% at the January 29 FOMC convocation.
In the grand scheme of things, the performance of the labor market remains crucial to gold’s outlook. If jobs data softens, it could prompt the Federal Reserve to soften its monetary stance, thus potentially elevating the allure of gold as a non-interest-bearing asset. Nonetheless, the buoyancy in job openings alongside a thriving services sector has escalated Treasury yields and buoyed the dollar. Consequently, chances of immediate rate cuts are a bit slim.
Adding an additional layer of complexity are the incoming U.S. tariffs proposed by President-elect Trump. These could well stir inflationary winds and inhibit the Federal Reserve’s capacity to slash rates. Hence, these policy dynamics have infused volatility regarding gold’s appeal as a non-yielding asset in today’s ever-changing economic landscape.
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Disclaimer: The opinions relayed herewith stem solely from the article’s author and may depart from Kitco Metals Inc.’s views. Although considerable efforts have been made to ensure the provided information’s accuracy, neither the author nor Kitco Metals Inc. can guarantee this precision. This piece serves informational purposes exclusively and is not a call to pursue any commodity, securities, or financial instrument exchange. Responsibility for any losses or damages derived from this publication rests neither with Kitco Metals Inc. nor the author.
