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In the world of records: Gold shines with biggest yearly profit since 2010
Gold prices rose in European trade on Tuesday for the first time in three days, holding above $2600 as US 10-year treasury yields tumbled.
At the last session of 2024, the year of record, gold is heading for its biggest yearly profit since 2010 with a 26% surge due to massive investment demand.
Prices
Gold prices rose 0.45% today to $2617 an ounce, with a session-low at $2602.
On Monday, gold lost 0.6%, the second loss in a row under pressure from the US dollar.
US Yields
US 10-year treasury yields fell 0.6% on Tuesday, sharpening losses for the second session and hitting a two-week trough at 4.507%, in turn boosting non-yielding assets such as gold.
Bond traders are waiting for more clues from the Federal Reserve on the future path of interest rates in 2025.
US Yields
According to the Fedwatch tool, the odds of a 0.25% US interest rate cut in January stood at 11%, with investors waiting for crucial US labor data next week to gather more clues.
Yearly Trades
Gold is up 26% so far this year, heading for the biggest yearly advance since 2010.
Gold hit a record high on October 31, 2024 at $2790 an ounce, after achieving successive record highs above $2100.
Global central banks launched a series of monetary easing policies after somewhat containing inflation, with lower rates usually benefiting the non-yielding gold.
Gold also benefited from haven demand as geopolitical tensions intensified in the Middle East and the Russian-Ukrainian war.
And central banks, and especially the People’s Bank of China, also accumulated gold reserves as a hedge against economic uncertainty.
SPDR
Gold holdings at the SPDR Gold Trust were flat yesterday at 872.80 tons.
Euro's decline in 2024: Between dollar's strength and eurozone economic challenges
The euro declined in European trade on Tuesday against a basket of major rivals, moving in a negative zone for the second straight day against the US dollar amid thin holiday trading.
The odds of an ECB interest rate cut in January rose following recent remarks by ECB President Christine Lagarde, which renewed concerns about a wider eurozone-US interest rate gap.
At the last day of trading in 2024, the common currency is heading towards a yearly loss due to a variety of factors, which include the dollar's indomitable strength and economic challenges in the euro zone.
The Price
The EUR/USD pair fell 0.1% today to $1.0397, with a session-high at $1.0415.
The pair closed down 0.15% on Monday, marking the first loss in three days away from a two-week high at $1.0458.
Lagarde
European Central Bank President Christine Lagarde said the eurozone is approaching its medium-term inflation target according to an interview with the Financial Times.
In earlier remarks, Lagarde said the ECB will cut interest rates more aggressively if inflation continues to slow down towards 2%.
She said that the eurozone is very much approaching the stage where the ECB can announce the achievement of the 2% inflation target,
European Rates
Following the remarks, the odds of a 0.25% ECB interest rate hike in January rose from 55% to 65%.
Markets are betting the ECB will cut interest rates by 1.75% throughout 2025, while waiting for important eurozone growth, inflation, and unemployment data to gather more clues.
US Rates
According to the Fedwatch tool, the odds of a 0.25% US interest rate cut in January stood at 11%, with investors waiting for crucial US labor data next week to gather more clues.
Rate Gap
The eurozone-US interest rate gap is now standing at 135 basis points in favor of the US, and will likely expand to 160 basis points in January, in turn boosting the greenback.
Yearly Trades
The euro is down 5.75% so far against the dollar this year, about to mark the third yearly loss in the past four years.
The eurozone faced many challenges including slower GDP growth and lower inflation, which impacted the euro's standing.
The European Central Bank took a more pessimistic note on the economy compared to the Federal Reserve, which prompted it to cut interest rates four times this year, compared to the Fed’s three cuts.
Overall, the ECB cut interest rates by 135 basis points this year, compared to the 100 basis points of cuts by the Fed, maintaining the rate gap between both economies.
Economists expect the ECB to adopt a faster pace of interest rate cuts in 2025 compared to the Fed.
The dollar is also boosted by the election win of US President-elect Donald Trump, which vowed tariffs and a whole host of inflationary and stimulatory policies, which would underpin the greenback even further.
Yen about to mark fourth yearly loss in row
The yen rose in Asian trade on Tuesday on track for the third profit in a row against the dollar, hitting two-week highs and moving away from recent five-month lows under the watchful eyes of Japanese authorities, which repeatedly sounded the alarm over the yen’s excessive weakness.
At the last day of trading in 2024, the Japanese currency is heading for the fourth yearly loss in a row as the Bank of Japan continued to adopt and utilize ultra-easy monetary policies even as global central banks moved towards normalization of monetary policies.
The Price
The USD/JPY pair fell 0.45% today to 156.14 yen per dollar, the lowest since December 20, with a session-high at 157.06.
The yen rose 0.6% on Monday against the dollar, moving away from five-month lows at 158.08.
The yen also lost ground as US 10-year treasury yields swooned this week.
BOJ
The Bank of Japan’s latest meeting minutes showed divisions, with some policymakers more confident about raising interest rates in the short term, while others are still cautious due to uncertainty about wages and Trump policies.
Bank of Japan Kazuo Ueda said last week the bank expects the economy to approach its 2% inflation target sustainably next year.
The current odds of a BOJ 0.25% interest rate hike in January stood at 55%, with investors now waiting for more inflation and labor data to gather more clues.
Yearly Trades
The yen is down over 10% so far in 2024 against the US dollar, about to register the fourth yearly loss in a row.
The yen was heavily pressured this year against the dollar and hit a 38-year nadir in July at 161.95 yen per dollar.
As the BOJ held onto its ultra-easy policies while other central banks moved to normalization, the yield gap continued to expand and hurt the yen’s standing.
A landslide election win by US President-elect Donald Trump also boosted the greenback against the yen and other major rivals, as Trump is expected to utilize inflationary economic policies.
US stock indices tumble over 1.5%
US stock indices tumbled on Monday amid a heavy tech selloff before the end of the year.
It comes as investors prepare for the New Year holiday, with many of them recalibrating their investment wallets and liquidating some assets.
On trading, Dow Jones tumbled 1.6% as of 15:14 GMT, or 676 points to 42,315 points, while S&P 500 tumbled 1.5%, or 91 points to 5880 points, as NASDAQ gave up 1.5%, or 294 points to 19428 points.