Gold prices inched up on Tuesday as investors weighed the Federal Reserve’s outlook for interest rates in 2025, amid a holiday-shortened trading week.
As of 03:07 GMT, spot gold rose 0.1% to $2,616.13 per ounce, while U.S. gold futures held steady at $2,629.80. With the year-end approaching, trading volumes are expected to remain thin.
The focus for investors has shifted to how aggressively, or not, the U.S. central bank will cut interest rates in the coming year. The Fed has continued its policy of rate reductions into December after a series of sharp hikes, but has signaled a more cautious approach to cuts in 2025. As a non-yielding asset, gold’s appeal tends to diminish when interest rates rise.
Despite a recent U.S. inflation report on Friday that eased some concerns about the pace of rate cuts next year, markets are still factoring in approximately 35 basis points of easing in 2025. Higher interest rates continue to weigh on gold’s attractiveness as a safe-haven asset.
Kelvin Wong, senior market analyst for Asia Pacific at OANDA, pointed out that investor attention is also turning to the policies of U.S. President-elect Donald Trump, particularly regarding trade tariffs. “Trade tariffs are a key negotiating tool, and if trading partners reject both the incentives and pressures from the U.S., they may retaliate with sanctions against U.S. products. This could lead to market volatility, potentially boosting gold’s demand as a safe-haven asset,” Wong explained.
As Trump prepares to return to the White House in January, U.S. investors are bracing for potential shifts in policy on tariffs, deregulation, and tax reforms, all of which could impact markets in 2025.
Gold has seen a strong performance this year, climbing nearly 27% and hitting multiple record highs. This marks its best annual performance since 2010, driven by strong central bank purchases, geopolitical uncertainties, and monetary policy easing by major central banks.
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