Background on Gold and Its Current Market Trends
Gold prices rebounded on Tuesday following a significant drop in the previous session, as market focus shifted back to geopolitical and economic risks. This trend is setting the stage for gold’s best year since 1979.
Recent Price Movements
Spot gold increased by 0.34% to $4,346.71 per ounce after experiencing its largest daily percentage loss in over two months on Monday. The maximum historical high of $4,549.71 was reached on Friday.
Meanwhile, U.S. gold futures for February delivery rose 0.20% to $4,352.30 per ounce.
Expert Insights
Peter Grant, vice president and metals strategist at Zaner Metals, commented on the market volatility: “Yesterday saw extreme volatility, with a strong surge during Asian trading and significant profit-taking… Today things have stabilized somewhat, and overall trade remains favorable.”
Factors Driving Gold’s Performance
Investors view gold as a safe-haven asset, causing its price to soar by 66% this year—its largest annual increase since 1979. Several factors have contributed to this rise:
- Relaxation of monetary policy
- Geopolitical tensions
- Central bank purchases
- Increased holdings in exchange-traded funds (ETFs)
Federal Reserve Minutes and Future Interest Rate Expectations
On Tuesday, the Federal Reserve released minutes from its December meeting, acknowledging divisions within the central bank regarding the path of monetary policy in 2023.
Market operators anticipate two interest rate cuts next year. In a low-interest-rate environment, non-yielding assets tend to perform well.
Performance of Other Precious Metals
Silver
Spot silver rose 4.6% to $75.52 per ounce. After hitting a record high of $83.62 on the previous trading session, it experienced its largest daily loss since August 2020.
Silver prices have surged by 161% this year, driven by its inclusion in the U.S. list of critical minerals, supply shortages, and growing industrial and investor demand.
Platinum
Spot platinum increased by 4.5% to $2,203.7 per ounce. It also reached a record high of $2,478.50 on Monday before experiencing its largest single-day decline.
Palladium
Palladium gained 2% to $1,648.75 per ounce following a 16% drop on Monday.
