Gold prices (XAU/USD) rose to around $2,625 in early Asian trading on Monday, attracting some buyer interest. However, market activity remained subdued, with lighter-than-usual trading volumes as investors prepare for the New Year holiday.
Several factors are currently supporting the price of gold, with geopolitical tensions and trade policy concerns driving demand for the precious metal. Former U.S. President Donald Trump’s potential return to the White House is seen as a key catalyst, as his administration’s trade policies and tariffs could escalate global trade conflicts. “Trade tensions, potential conflicts, and unpredictable policies under Trump’s leadership could push investors toward gold as a safe-haven asset,” said the managing director of RiddiSiddhi Bullions Limited.
In addition to political uncertainties in the U.S., escalating geopolitical tensions in the Middle East and the ongoing Russia-Ukraine war have also provided a boost to gold prices. On Sunday, Israeli forces attacked two hospitals in northern Gaza, including a strike on the al-Wafaa Hospital in Gaza City, which killed at least seven people and critically injured others. These events contribute to a heightened sense of risk, further driving demand for gold as a store of value.
On the flip side, expectations that the U.S. Federal Reserve may reduce the pace of its rate cuts in 2025 could limit gold’s upside potential. A stronger U.S. dollar, driven by expectations of fewer rate cuts, typically exerts pressure on gold prices, as a stronger dollar makes the non-yielding asset less attractive to investors. This dynamic could cap the recent rally in gold, despite the geopolitical and trade-driven factors supporting the yellow metal.
Related topics:
- India’s Gold Reserves Surge: RBI Reports 60% Increase in Domestic Holdings
- Gold Prices Hold Steady, Set for Modest Weekly Gain
- Gold Prices Approach $2,800: Should You Invest Now?
