Gold steadies after record-high close!

On Wednesday, December 27th, spot gold registered its highest-ever closing price at $2077.16.

To be clear, the highest-ever price that this precious metal has ever traded at stands at $2147.14, using intraday prices during the December 4th session.

The holiday period, with thin liquidity and volumes can throw up some interesting price action, often with no specific catalysts attached.

However, some usual suspects (traditional drivers of gold bulls) have certainly been in play in recent sessions.

Gold takes advantage of lower Treasury yields and US dollar

Gold's highest-ever daily closing price came Treasury bonds were bought strongly, meaning Treasury prices rose while its yields plunged.

Gold is a zero-yielding asset, which means investors do not get paid for holding on to the asset.

Hence, lower Treasury yields makes it less difficult to justify holding on to gold (lower opportunity cost).

The falling US dollar also helped gold climb higher yesterday.

After all, with gold prices denominated in USD, these two assets tend to have an inverse relationship.

That means when the US dollar goes down, gold tends to go up, and vice versa.

In fewer words, lower yields/USD tend to boost prices of the zero-yielding gold.

Gold catches safe haven bid?

Safe havens are assets that help protect their wealth during times of uncertainty and fear.

And with wars still raging between Russia-Ukraine, and Israel-Hamas more recently, with the latter conflict threatening to widen further, that may have prompted some investors to move funds into safe havens such as gold.

The rise in safe haven prices could be seen not just for gold and US Treasuries as mentioned above (US Treasury yields fall when its prices rise), the Swiss Franc, another popular safe haven, also gained yesterday.

The "swissy" actually had its second biggest gain of the year outside of days which featured policy decisions by the Federal Reserve or the European Central Bank.

That saw USD/CHF drop to its lowest since the SNB intervention in January 2015.

Fed policy pivot is biggest driver for bullion bulls

Overall, the Fed's forecasts for moving US interest rates lower in 2024 has been the biggest factor that's driving gold's 13.8% year-to-date gains.

Gold is on course for its best annual percentage gain since 2020!

And as long as we continue to see broad USD softness, dovish central banks (interest rates going down) and falling Treasury yields, gold may well pursue even higher heights in 2024.

However, for the immediate future, big resistance may arrive around current levels, as the precious metal has struggled to stay above $2070 since 2020.