Gold faces critical days as the US earnings season begins

14 Ocak 2025

Gold faces critical days as the US earnings season begins, trade wars loom

Written by Samer Hasn, Senior Market Analyst at XS.com

Gold resumes its gains today and holds above $2,665 per ounce after a correction that followed four consecutive days of gains.

Gold is supported by high uncertainty in both the US stock and bond markets, as well as in international markets with the potential escalation of trade wars.

In the US, the uncertainty comes from pessimism about the impossibility of cutting interest rates until the end of the first half of this year, in light of accelerating inflation and bullish fears of it, with the anticipation of protectionist policies that may be implemented with Donald Trump’s return to the White House in a week.

These inflationary factors would have put pressure on gold to decline with the rise in bond yields, but the relatively high uncertainty in the Treasury market is reducing the impact of higher yields, according to the World Gold Council. The weak attractiveness of Treasuries in turn comes from concerns that may worsen under Trump regarding the deficit and rising government debt.

Prolonged high interest rates could also raise concerns about companies’ ability to adapt to tighter monetary conditions. These concerns may be dispelled or activated this week with the unofficial start of the corporate earnings season, which will begin with the announcement of the results of the major banks for the fourth quarter of the last year. Also, the Consumer Price Index figures that we will see tomorrow may help to strengthen expectations about the future path of monetary policy.

If the results do not match expectations, we may see a deepening of stock market correction, which may coincide with the decline in the attractiveness of high-yield bonds, which will make it easier for gold to reach its historic peak.

If the results don’t live up to expectations, we could see a deepening of the stock market correction, which could coincide with the decline in the attractiveness of high-yield bonds, making it easier for gold to reach its all-time high. According to the Wall Street Journal, citing analysts, the quarterly results will need to be bright across all sectors of the market, not just those of tech, to enable stocks to regain their upward trend.

With Trump also returning, the focus is shifting to China and the trade policies that will be taken to limit its exports to the United States. The blow that could be taken by exports could deepen concerns about the ability of the Chinese economy to restore growth amid a weak domestic demand environment. While Chinese companies are in the worst position to face the huge tariffs from the United States, according to the Wall Street Journal.

This disruption in trade between the two economic poles is likely to create further conflicts between China and countries that will try to prevent the increase in the flow of exports from the former. I think this is what could cause more economic trouble for both sides of the trade.

These concerns combined have fueled gold buying by investors, especially in Asia, last December, according to the World Gold Council.

What investors will also be waiting for is the crystallization of the impact of government support measures on the Chinese economy and the extent of the recovery in domestic demand. While a recovery in consumer and domestic investor sentiment could reduce the appeal of gold.

Farther, in the Middle East, we are likely to see an explosion of conflict, whether on the Yemeni or Iranian fronts or both, with the return of Trump. I think the impact of this escalation may be temporary and limited, given the weakness that Iran suffers from, both militarily and economically.

 

Zaid Barem / YMM