Gold advances after 27% annual gain as traders eye U.S. rate path

Gold climbed after notching its biggest annual gain since 2010, with the metal viewed as a haven asset benefiting as a risk-off mood swept through broader markets.

Bullion rose as much as 0.8%, advancing alongside other precious metals as Asian and European equity markets slid on the first trading day of the year. Last year’s 27% rally was driven by the Federal Reserve’s rate-cutting cycle, sustained haven demand and a wave of purchases by central banks, with many analysts seeing further gains ahead this year.

“Despite the Fed’s cautious tone, sustained buying by central banks and geopolitical uncertainties are expected to keep gold in focus as a preferred safe haven asset,” Kaynat Chainwala, an analyst at Kotak Securities, said in a note.

Investors are focused on the rate path in the U.S., after Chair Jerome Powell last month signaled greater caution over how quickly the central bank can continue reducing borrowing costs amid renewed concerns about inflation. Lower rates are typically positive for bullion, which doesn’t pay interest.

Key economic data due later this week, including U.S. jobless claims and manufacturing reports, will be closely watched for clues on the Fed’s easing trajectory.

Spot gold rose 0.6% to $2,640.57 an ounce at 11:35 a.m. in London. The Bloomberg Dollar Spot Index edged higher, erasing an earlier decline. Silver, palladium and platinum all rose.