The strength of the US dollar and Federal Reserve policy influence gold prices
The US dollar, which briefly rose to 109.30, was supported by rising government bond yields. The yield on the 2-year bond is 4.23%, while the 10-year yield hovers around 4.60%. Market participants remain alert to Trump’s economic policies, including possible tax reforms and tariff measures, which could influence future Fed decisions.
Recent economic data indicates mixed signals; US retail sales rose 0.4% to $729.2 billion in December, slightly less than expected, while inflation remained stable and the consumer price index (CPI) rose 2.9% year-on-year. The core CPI, excluding food and energy, rose 3.2%.
Fed policymakers remain cautious, with Chicago Fed President Austan Goolsbee noting a stabilizing labor market. Trump’s Treasury Secretary nominee Scott Bessent emphasized the need to uphold the role of the US dollar as a global reserve currency to ensure economic stability.
Chinese economic policies and global tensions are impacting gold prospects
The Chinese central bank has left its Loan Prime Rates (LPRs) unchanged, with the one-year rate at 3.10% and the five-year rate at 3.60%. This policy decision underlines Beijing’s focus on economic stability amid global uncertainties.
Meanwhile, geopolitical tensions continue, with ongoing conflicts in Eastern Europe and the Middle East driving demand for safe havens. Russian military actions in eastern Ukraine, along with broader market uncertainties, continue to support gold prices.
Analysts expect that unless these tensions ease, gold could remain resilient in the near term.