Commodities
ING explains why rally in gold prices ‘isn’t over just yet’
Investing.com — The rally in gold prices “isn’t over just yet,” according to ING.
The precious metal has enjoyed a record-breaking rally in 2024, surging 25% year-to-date driven by a combination of Federal Reserve rate cuts, increased central bank purchases, and robust safe-haven demand amid geopolitical and economic uncertainties.
Analysts at ING expect these factors to sustain upward momentum in 2025, pushing gold prices to new highs.
The Federal Reserve’s easing cycle has been pivotal in supporting gold’s rally. In September, the Fed implemented its first rate cut since 2020, reducing rates by 50 basis points, followed by an additional 25 basis points in November. These actions brought the federal funds target range to 4.5%-4.75%.
“Lower borrowing costs are positive for gold as the metal doesn’t pay interest,” ING explains. The Fed had held rates in the 5.25%-5.5% range—the highest in over two decades.
Looking ahead, ING believes the market’s focus will be on the pace of further monetary easing under President Donald Trump’s administration.
Inflationary pressures stemming from Trump’s proposed policies, including tariffs and stricter immigration controls, could limit the Fed’s rate cuts. ING’s U.S. economist, James Knightley, anticipates a further 25 basis point cut in December, but the trajectory beyond that remains uncertain, with a potential pause at January’s Federal Open Market Committee meeting.
Central bank gold buying has also bolstered demand for the bullion, although the pace of purchases slowed in the third quarter due to high prices.
Poland’s central bank was the top buyer, adding 42 tonnes to its reserves, which now total 420 tonnes or 16% of its holdings. Governor Adam Glapiński reiterated the bank’s aim to increase gold’s share of currency reserves to 20%.
The Reserve Bank of India (NS:) maintained its buying streak, adding to reserves each month during the quarter. Meanwhile, the People’s Bank of China did not increase its gold holdings for the sixth consecutive month in October.
“Looking ahead into next year, we expect central banks to remain buyers due to geopolitical tensions and the economic climate,” ING noted.
A survey conducted by the World Gold Council in April 2024 revealed that 29% of central bank respondents plan to increase their gold reserves within the next 12 months, citing geopolitical tensions and economic challenges as driving factors
Global gold exchange-traded funds (ETFs), meanwhile, have seen inflows for six consecutive months, supported by North American and Asian demand.
Investor holdings in gold ETFs typically rise alongside prices, but much of 2024 saw a divergence as prices hit record highs while ETFs experienced outflows. This trend reversed in May, with sustained inflows until a decline in November following the U.S. election. Analysts anticipate ETF inflows to pick up again in 2025 as rate cuts continue.
Overall, ING analysts believe gold’s positive momentum will continue in the short to medium term.
“The macro backdrop will likely remain favorable for the precious metal as interest rates decline and foreign-reserve diversification continues amid geopolitical tensions, creating a perfect storm for gold,” they wrote.
In the long term, Trump’s inflationary policies, such as tariffs and stricter immigration controls, may constrain further Federal Reserve rate cuts. While a stronger U.S. dollar and tighter monetary policy could weigh on gold, heightened trade tensions may enhance its safe-haven appeal.
ING forecasts gold prices to average $2,760 per ounce in 2025.
Investing.com — Copper prices are down more than 1% after the Federal Reserve hinted at fewer rate cuts for the upcoming year.
The shift to a more hawkish stance by the Fed has resulted in an increase in bond yields, a surge in the strength of the dollar to 25-month highs, and a spike in volatility. This shift has also led to a sharp decline in key commodity currencies.
Market participants have expressed concern that there isn’t much on the annual calendar to halt this downward trend. The three-month London Metal Exchange (LME) contract has registered a 1.5% decrease, trading at $8,912 a ton.
In addition to the Federal Reserve’s stance, looming U.S. tariffs on Chinese goods and uncertainties surrounding China’s domestic demand outlook continue to pressure the market.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.
Investing.com– Gold prices rebounded from a one-month low on Thursday as the Federal Reserve lowered interest rates as expected, although the central bank’s hawkish stance on future rate cuts clouded the outlook for bullion.
Gold prices had dropped more than 2% overnight after the Fed’s policy meeting indicated fewer rate cuts in 2025, as sticky inflation remained a major concern.
jumped as much as 1.3% to $2,618.11, while expiring in February dropped 1.2% to $2,620.79 an ounce by 22:51 ET (03:51 GMT).
Spot gold rebounds, but outlook dim amid slower rate cuts
The Fed reduced by 25 basis points but signaled it will adopt a slower pace for future cuts.
Lower interest rates bode well for gold prices as the opportunity cost of holding gold decreases, making it more attractive compared to interest-bearing assets like bonds.
However, gold futures fell sharply as the rates are expected to remain higher for a longer period after Wednesday’s cut. Markets have ruled out chances of a cut in January and now expect just two more cuts in 2025, against their earlier expectations of four.
Fed Chair Jerome Powell said further reductions depend on progress in curbing persistent inflation, reflecting policymakers’ adjustments to potential economic shifts under the incoming Donald Trump administration.
The Federal Reserve’s hawkish stance was aimed at curbing inflation, but it also signals confidence in the resilience of the U.S. economy. This risk-on sentiment can reduce the demand for safe-haven assets, further dampening bullion’s prospects.
With fewer cuts expected in 2025, the is expected to strengthen further. The greenback surged to an over two-year high on Wednesday.
Additionally, the maintained its interest rates on Thursday, as policymakers remained cautious over Japan’s economic outlook and the path of inflation.
Among other precious metals, rose 0.7% to $928.90 an ounce, while slumped 2.7% to $29.922 an ounce.
Copper falls on as dollar hits 2-yr high
Among industrial metals, copper prices extended declines on Thursday after the Fed’s hawkish stance bolstered the dollar. The red metal took limited support from reports of more fiscal spending in top importer China over the coming year.
The rose 0.1% in Asian trade on Thursday and was at an over two-year high after the Fed meeting.
Benchmark on the London Metal Exchange fell 1.4% to $8,921.50 a ton, while one-month were largely unchanged at $4.089 a pound.
By Colleen Howe, Trixie Yap and Anna Hirtenstein
(Reuters) -Oil prices fell on Thursday after the U.S. Federal Reserve signalled it would slow the pace of interest rate cuts in 2025, which could hurt economic growth, reduce fuel demand and strengthen the dollar.
futures declined by 29 cents to $73.10 a barrel by 1249 GMT. U.S. West Texas Intermediate crude lost 16 cents to $70.42.
The declines gave back Wednesday’s gains on a drop in stocks and the Fed’s expected rate cut of 25 basis points.
Prices weakened after U.S. central bankers issued projections pointing to two quarter-point cuts in 2025 on concern over rising inflation. That was half a point less than they had flagged in September.
“The bottom line for oil is the longer the Fed stays on pause, the stronger the U.S. dollar. This tends to generate headwinds for commodities like oil,” said Harry Tchilinguirian at Onyx Capital Group.
A stronger dollar makes dollar-priced commodities more expensive while higher interest rates weigh on economic growth, potentially reducing demand for oil.
Chinese refining giant Sinopec (OTC:), meanwhile, expects China’s oil consumption to peak by 2027, it said on Thursday.
“The demand-supply balance going into 2025 continues to look unfavourable and predictions of more than 1.0 million bpd demand growth in 2025 look stretched in our opinion. Even if OPEC+ continues to withhold production, the market may still be in surplus,” said Suvro Sarkar, DBS Bank energy sector team leader.
Though demand in the first half of December rose year on year, volumes remained lower than expected by some analysts.
JP Morgan analysts said that global oil demand growth for December so far was 700,000 barrels per day (bpd) less than it had expected, adding that global demand this year has risen by 200,000 bpd less than it had forecast in November 2023.
Official data from the Energy Information Administration on Wednesday showed U.S. crude stocks fell by 934,000 barrels in the week to Dec. 13. Analysts polled by Reuters had expected a drawdown of 1.6 million barrels. [EIA/S]
While the decline was less than expected, the market found support from last week’s rise in U.S. crude exports by 1.8 million bpd to 4.89 million bpd.
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