A surging gold price coupled with US dollar strength has come at a time where the Australian dollar slump is considered overdone by some investment banks.
Meanwhile, the prospects for gold remained elevated with Royal Bank of Canada forecasting a price for precious metal to top US$2,900 ($4,623) per ounce.
The weaker Australian dollar (AUD) and surging gold price reflect a political dynamic with the electoral pivot to a new and avowed business friendly president, Donald Trump, who has been resolute in an America first approach — the prevailing tailwind for the world’s reserve currency, the US dollar.
Westpac economist, Jameson Coombs, told the Australian Broadcasting Corporation on 13 January that strong employment data following the most recent US non-farm payrolls report underpins the current “US economic exceptionalism narrative” noting the number of interest rate cuts in America is forecast to be fewer in 2025.
In 2024, the gold price surged to US$2,500/oz, a significant rise from US$2,000/oz in 2023, while the AUD/USD exchange rate fell to 0.62, its lowest level since 2002 excluding the COVID period.
Australia’s currency has been one of the better performing fiat currencies in the last 20 years based on China’s demand of minerals but has since moderated following concerns around the world’s second largest economy’s property sector.
The Australian Financial Review survey of market economists expected the Australian dollar to rise to $US0.65 by the middle of the year.
Source: Australian Government, World Gold Council
Write to Dan Petrie at Mining.com.au
Images: Mining.com.au & iStock
