Oil prices rose in the first trading sessions of the current year at a time when investors returning from the holidays are watching the recovery in China’s economy and demand for fuel after President Xi Jinping pledged to boost growth, while gold rose with expectations about the future of interest rates in the United States, and the dollar stabilized.
Oil is rising
Brent crude futures increased 27 cents, or 0.33%, to $74.89 per barrel, in the latest trading, after closing up 65 cents on Tuesday, the last trading day in 2024.
US West Texas Intermediate crude futures rose 21 cents, or 0.29%, to $71.91 per barrel, after closing up 73 cents in the previous session.
On Tuesday, the Chinese President said in his New Year’s speech that his country will implement more proactive policies to boost growth in 2025.
According to a Caixin/Standard & Poor’s Global survey on Thursday, factory activities in China grew last December, but at a slower pace than expected amid concerns about the future outlook for trade and potential risks from tariffs that US President-elect Donald Trump may impose.
This was consistent with what was stated in an official survey issued on Tuesday, which also indicated that manufacturing activity in China witnessed slight growth last December, despite the recovery in services and construction. The data suggests that political stimulus is seeping into some sectors as China prepares for new trade risks.
Investors are also awaiting weekly US oil inventory data from the Energy Information Administration, which was postponed until Thursday due to the New Year holiday.
A Reuters survey showed on Tuesday that expectations were that crude oil and distillate stocks fell last week, while gasoline stocks likely rose.
Gold goes up
Gold prices rose, continuing the impressive performance recorded last year, amid anticipation of more indicators about the future of interest rates in the United States and Trump’s policies towards customs duties.
Gold in spot transactions increased 0.55% to $2,639.35 per ounce, according to trading data, and US gold futures contracts rose 0.42% to $2,651.60 per ounce.
The yellow metal emerged as one of the best performing assets in 2024 after it increased by more than 27% in its largest annual gain since 2010.
The dollar index fell by 0.1%, which makes gold more attractive given that it is a safe haven from currency losses.
“Gold appears to be consolidating in a narrow range, which usually indicates that the market is ready to take off,” said Kyle Rodda, a financial markets analyst at Capital.com. “I suspect that this takeoff will be to the upside.”
He added that gold is likely to continue rising (in 2025), driven by geopolitical risks and expectations of rising government debt and the resulting deep fiscal deficit under the Trump administration, despite potential challenges from slower interest rate cuts and a stronger dollar.
The market is now awaiting a new set of catalysts, including a series of US economic data scheduled for release next week that may impact interest rate expectations for 2025, and Trump’s tariff policies.
Traders expect the Federal Reserve (the US central bank) to adopt a slow and cautious approach regarding further cutting interest rates in 2025, with inflation continuing to exceed the central bank’s annual target of 2%.
Gold is seen as a hedge against inflation, especially in times of geopolitical and economic uncertainty.
According to the CME FeedWatch tool, the markets see only an 11.2% chance that the US Federal Reserve will cut interest rates in January, compared to an 88.8% chance of maintaining the status quo.
As for other precious metals, their performance was as follows:
- Silver increased 1.52% to $29.35 per ounce.
- Palladium rose 0.31%, recording $913.28 per ounce.
- Platinum rose 1.13% to record $914 per ounce.
Silver in 2024 recorded its best performance since 2020, while platinum and palladium declined.
Currency performance
The dollar stabilized in the first session of the new year after rising 7% during 2024 against most currencies, while the yen fell to its lowest levels in more than 5 months with expectations that US interest rates will remain high for a longer period.
Early in the year, the market will focus on the incoming Trump administration and its policies that are widely expected to not only boost growth, but also increase price pressures, supporting US Treasury yields and boosting demand for the dollar.
The large interest rate differential between the United States and other economies has cast a shadow over the currency market, leading to a sharp decline in most currencies against the dollar in 2024.
- The yen was one of the most affected after it fell by more than 10% in the fourth year of decline, and the Japanese currency began the New Year’s trading at a low of 157.54 against the dollar, before improving and rising to 156.83 yen to the dollar, not far from the lowest level in 5 months that it touched on Tuesday. The past amid expectations of intervention by the authorities.
- The dollar index – which measures the US currency against 6 other currencies – recorded 108.39 in early trading, which is slightly less than the highest level in two years that it recorded the day before yesterday.
“The dollar is likely to remain in the lead (this year) given its high yield so far, the exceptionalism of the US and its appeal as a safe haven in times of uncertainty,” said Charu Chanana, investment strategist at Saxo Bank.
Expectations of weak growth outside the United States, geopolitical tensions in the Middle East, and the war between Russia and Ukraine all contributed to strengthening demand for the dollar.
- The euro rose at $1.0396 after falling by more than 6% in 2024. Traders expect deeper interest rate cuts by the European Central Bank in 2025, as markets expect cuts of about 113 basis points compared to cuts of about 42 basis points by the US Central Bank.
- The pound sterling record $1.2496.
- The British pound fell 1.7% last year, but it was among the best currencies amid a better-than-expected performance of the British economy.
Source : Reuters + CNBC + Websites
