The British pound maintained strength around $1.26 on Tuesday, remaining near a two-month high as investors analyzed a recent labor market report. This report indicated a surge in UK wages, growing at the fastest pace in eight months and reaching 5.9% for the three months ending in December. This increase surpasses the 5.6% growth observed in the September-to-November period. This rapid wage growth could potentially contribute to inflationary pressures, prompting the Bank of England to sustain interest rates at 4.5%. The unemployment rate held steady at 4.4%, defying projections of a rise to 4.5%. The pound also showed strength against the euro, trading at €1.20 on Tuesday morning.
Gold Prices Remain Above $2,900
Gold prices held above the significant $2,900 threshold, fueled by ongoing concerns about a potential trade war and the resulting demand for safe-haven assets. Spot gold prices increased by 0.5% to $2,912.33 per ounce, with gold futures rising 0.8% to $2,923.00. This recent surge stems from anxieties surrounding US trade policies and potential retaliatory tariffs from trading partners. Reports indicating the European Union’s consideration of import controls on specific US goods further amplified fears of a global trade dispute.
In response to these developments, Goldman Sachs elevated its year-end 2025 gold price forecast to $3,100 per ounce, up from the previous projection of $2,890. The bank cited “sustained central bank demand” as the primary reason for this upward revision. UBS also adjusted its outlook, with analyst Joni Teves highlighting the “unprecedented market dislocations” in the gold market. The bullish sentiment is expected to persist into 2025, driven by gold’s safe-haven appeal amidst global volatility. Gold prices have already seen a 10% increase in 2025.
Oil Prices Rise Following Drone Attack
Oil prices saw a modest increase, building on previous gains, after a drone attack on a Russian oil pipeline pumping station disrupted flows from Kazakhstan. However, concerns regarding potential supply increases in the near future tempered these gains. Brent crude futures rose 0.9% to $75.38 per barrel, while US West Texas Intermediate (WTI) crude climbed 1% to $71.43 per barrel. This price increase followed a period of decline, with the market reacting to news of the drone strike and subsequent supply reduction.
Despite the recent surge, analysts remain cautious. BMI Research predicts Brent crude prices will average $76 per barrel this year, representing a 5% decrease from the 2024 average. Factors such as oversupply, tariffs, and trade tensions are expected to weigh on the market. Reports suggest OPEC+ is considering extending current production cuts beyond the first quarter of 2024 to stabilize oil prices amidst global demand uncertainties. However, Russian Deputy Prime Minister Alexander Novak indicated that OPEC+ has no plans to postpone the scheduled monthly supply increases for April. The outcome of negotiations regarding the situation in Ukraine remains a significant factor influencing the crude market. Meanwhile, the FTSE 100 experienced a slight decline on Tuesday morning, retreating 0.1% to 8,760.72 points.
