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Gold prices climb as demand rises amid uncertainty sparked by Trump-related developments.
FUNDAMENTAL OVERVIEW:
Gold prices inched higher on Thursday, extending recent gains, as increased uncertainty surrounding a hawkish Federal Reserve and President-elect Donald Trump’s trade tariff plans boosted demand for safe-haven assets.
Trading activity is expected to be subdued on Thursday, as U.S. traders observe a holiday in honor of former President Jimmy Carter, with a state funeral scheduled later in the day.
Increased demand for safe-haven assets amid economic uncertainty
Bullion prices gained this week, driven by safe-haven demand amid uncertainty over Trump’s trade and immigration policies, which dampened risk appetite.
A CNN report highlighted that Trump could declare a national economic emergency to legally support his plans for universal trade tariffs.
The focus shifted to Trump’s policies after the Fed’s December meeting minutes revealed concerns over persistent inflation. Specifically, Fed officials worried that Trump’s expansionary and protectionist measures could contribute to inflation in the long run.
The minutes also reiterated the Fed’s plan to slow the pace of interest rate cuts in 2025, reducing its projected cuts from four to two.
Following the Fed’s minutes, Treasury yields and the dollar surged. Elevated rates for an extended period could negatively affect non-yielding assets like metals, increasing the opportunity cost of investing in these sectors.
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