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– Oil prices slipped slightly lower Monday, as optimism over tighter supplies, amid stricter US sanctions against Russia, was offset by caution before President-elect Donald Trump’s inauguration.
At 07:15 ET (12:15 GMT), expiring in March dropped 0.2% to $80.61 a barrel, while fell 0.1% to $77.31 a barrel.
Crude prices retreated slightly after recording four weeks of strong gains, as traders awaited news from Washington, with volumes limited by the US holiday.
Trump inauguration in focus for tariffs, energy cues
Markets were now focused squarely on Trump’s inauguration later on Monday, with the President-elect having promised increased trade tariffs on top oil importer China.
Trump also reiterated plans to increase US energy production during a Sunday rally, promising to lift regulations on the domestic energy sector.
Higher US production- which already stood close to record highs of over 13 million barrels per day in 2024- could potentially offset the impact of recent sanctions against Russia by keeping global crude supplies underpinned.
Trump has also vowed to dole out expansionary policies during his term- a trend that could underpin demand in the world’s biggest oil importer. US oil demand was a mixed bag in recent months. While cold weather did spur increased demand for heating fuels, it disrupted travel across large swathes of the country during the travel-heavy year-end holidays.
“There is a fair amount of uncertainty across markets coming into this week given the inauguration of President Trump and the raft of executive orders he reportedly is planning to sign. This combined with it being a US holiday today, means that some market participants may have decided to take some risk off the table,” analysts at ING said, in a note.
Oil markets weigh demand, supply outlook
Traders were speculating over a somewhat mixed outlook for oil supply and demand. While recent US sanctions on Russia could limit global supplies, this could be offset by demand remaining soft, especially if Trump imposes steep trade duties on China.
China is the world’s biggest oil importer, and has seen a steady decline in its appetite for crude amid persistent economic weakness.
“Output data from China on Friday shows that refineries increased the amount of they processed by 1.3% year-on-year in December,” said ING. “However, for full-year 2024, refinery activity still fell by 3.6% YoY, reflecting weaker domestic demand. Output and trade numbers suggest that apparent oil demand in December came in at a little more than 13.9m b/d, down from 14m b/d the previous month, but up 0.6% YoY.”
The People’s Bank of China kept its benchmark loan prime rate unchanged, as widely expected, on Monday.
Beijing is expected to ramp up its stimulus measures in the face of trade headwinds under Trump. Recent data also showed China’s economy improved after Beijing doled out its most aggressive round of stimulus measures in late-2024.
Recent gains in oil have also been curtailed by easing tensions in the Middle East, as Hamas and Israel exchanged hostages and prisoners over the weekend under a recently signed ceasefire, which also saw traders attach a smaller risk premium to oil.
(Ambar Warrick contributed to this article.)
By Arunima Kumar
(Reuters) -Oil prices were steady on Monday as traders awaited U.S. President-elect Donald Trump’s inauguration in the hope of some clarity on his policy agenda, including plans to end the Russia-Ukraine war.
futures dropped 37 cents, or 0.46%, to $80.42 a barrel by 1004 GMT. U.S. West Texas Intermediate (WTI) crude futures were down 24 cents, or 0.31%, at $77.64.
The more active U.S. WTI crude March contract fell 36 cents to $77.03.
The focus is what executive orders Donald Trump will sign over the next 24 hours, said UBS analyst Giovanni Staunovo.
Charalampos Pissouros at broker XM, meanwhile, said that oil prices were trading a little lower on expectations that Trump will relax energy-related sanctions against Russia in exchange for an end to the war in Ukraine
Trump, who will be inaugurated later on Monday, is widely expected to make a flurry of policy announcements in the first hours of his second term, including an end to a moratorium on U.S. liquefied (LNG) export licences as part of a wider strategy to strengthen the economy.
The Brent and WTI benchmarks advanced more than 1% last week for a fourth consecutive weekly gain after the Biden administration sanctioned more than 100 tankers and two Russian oil producers.
That led to a scramble by top buyers China and India for prompt oil cargoes and a rush for ship supply as dealers of Russian and Iranian oil sought unsanctioned tankers for oil shipment.
While the new sanctions could cut supply from Russia by nearly 1 million barrels per day (bpd), recent price gains could be short lived depending on Trump’s actions, ANZ analysts said in a client note.
Trump has promised to help to end the Russia-Ukraine war quickly, which could involve relaxing some curbs to enable an accord, they said.
Easing tension in the Middle East also kept a lid on oil prices. Hamas and Israel exchanged hostages and prisoners on Sunday that marked the first day of a ceasefire after 15 months of war.
(Reuters) – Goldman Sachs on Monday said the market is pricing in odds of about 50% that there will be a 10% U.S. tariff on the metal by the end of the first quarter of this year.
Analysts at the U.S. investment bank said in a client note that the estimate is similar to their own 50% subjective probability of a 10% effective tariff on copper by year-end.
Three-month copper on the London Metal Exchange eased 0.3% to $9,167 a metric ton as at 0706 GMT after reaching a one-month peak last week. [MET/L]
President-elect Donald Trump returns to the White House later in the global day with an inauguration speech which traders will parse for policies to be enacted on day one. Trump has talked of tariffs of as much as 10% on global imports as well as 60% on Chinese goods and a 25% import surcharge on Canadian and Mexican products.
Goldman also noted that the oil market is pricing in a nearly 40% chance of a 25% U.S. tariff on Canadian goods including oil, versus the bank’s 15% subjective probability of a 25% effective tariff by the end of the year.
futures traded around $80.69 a barrel, while the more active U.S. West Texas Intermediate crude April contract was steady at $77.36. [O/R]
The investment bank assigned a 10% chance to a 10% effective tariff on gold being introduced within the next 12 months. It said bullion’s status as a financial asset makes it likely to be exempt from broad-based tariffs.
prices were up 0.3% at $2,708.77 per ounce while U.S. were little changed at $2,749.70. [GOL/]
The amount of gold stocks in COMEX-approved warehouses has jumped by one-third in the past six weeks as market players sought deliveries to hedge against the possibility of tariffs.
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