The British pound held steady at $1.26 on Tuesday, hovering near its highest level in two months, as traders absorbed mixed labour market data. UK wages saw their most significant rise in eight months, adding pressure on Bank of England Governor Andrew Bailey to tackle inflation. According to the Office for National Statistics, pay excluding bonuses rose by 5.9% for the three-month period ending in December, up from 5.6% in the September-to-November period. This increase in wages raised concerns that higher pay could stoke inflationary expectations, potentially prompting the Bank of England to keep interest rates at 4.5%.
The UK’s unemployment rate remained steady at 4.4%, defying expectations of a rise to 4.5%. Investors were initially concerned about the data, particularly after Chancellor Rachel Reeves announced a hike in employers’ national insurance contributions, set to rise by 1.2% to 15% in April. Despite these concerns, sterling was also higher against the euro on Tuesday morning, trading at €1.20.
Gold Prices Surge Amid Trade War Fears
Gold prices continued to hover above the critical $2,900 mark, driven by heightened demand for the precious metal as a safe haven amid ongoing trade tensions. The spot price of gold rose 0.5% to $2,912.33 per ounce, while gold futures gained 0.8% to $2,923.00. The latest surge was fueled by concerns over US President Donald Trump’s trade policies, particularly his plans for tariffs on trading partners. Although Trump has delayed the imposition of reciprocal tariffs until April, the uncertainty continues to push investors toward gold.
Compounding these fears, reports emerged over the weekend suggesting that the European Union is considering import controls on certain US goods, further escalating concerns of a global trade conflict. In response to these developments, Goldman Sachs raised its gold price forecast for year-end 2025 to $3,100 per ounce, up from an earlier target of $2,890. Goldman cited sustained central bank demand and anticipated a 9% price increase by year-end, bolstered by a gradual rise in ETF holdings as the US Federal Reserve reduces rates.
UBS also revised its outlook, with analyst Joni Teves noting that gold has experienced “unprecedented market dislocations” following a record high in 2024. Teves expects the bullish sentiment to continue into 2025, driven by gold’s status as a safe-haven asset in a volatile global environment. “Investors are likely to act quickly on any corrections this time around to avoid missing opportunities,” Teves said. Gold prices have already surged by 10% in 2025.
Oil Prices Rebound on Supply Concerns
Oil prices saw a modest rebound on Tuesday, with Brent crude futures rising 0.9% to $75.38 per barrel and US West Texas Intermediate (WTI) crude climbing 1% to $71.43 per barrel. The price increase came after a period of weakness, as market participants reacted to news of a drone strike on Kazakhstan’s export pipeline, which has disrupted supply from the region.
“The overriding theme driving oil prices lately has been around supply expectations,” said Yeap Jun Rong, market strategist at IG. “The recent weakness in prices was countered by news of the drone strike, which triggered a reversal of some bearish sentiment.” Despite the brief surge in prices, analysts remain cautious. BMI Research forecasts that Brent crude will average $76 per barrel in 2025, a 5% decrease from the 2024 average, citing oversupply, tariffs, and trade tensions as major concerns for the market.
Further influencing sentiment, reports suggested that OPEC+ (the Organization of the Petroleum Exporting Countries and its allies) is considering extending its current production cuts beyond the first quarter of 2024. This move aims to stabilize oil prices amid uncertainties regarding global demand. However, Russian Deputy Prime Minister Alexander Novak stated that OPEC+ does not plan to delay the scheduled monthly supply increases slated for April.
“There is plenty to be bearish about in the crude market, with the outcome of Ukraine negotiations being the biggest factor,” said Neil Crosby, an analyst at Sparta Commodities. “Russian oil may partially return to the legitimate market, though there are many potential outcomes.”
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