Banyan Gold Corp. (TSXV: BYN, OTCQB: BYAGF)
The New Yukon Gold Rush
Kathy Lien, Managing Director of FX Strategy at BK Asset Management and co-founder of BKForex.com, said in an interview with Kitco News that the correlation between gold, the U.S. dollar, and bond yields broke down on Friday (10 January) is sending an important message to the market.
The U.S. Department of Labour released December’s non-farm payrolls data on Friday, and the results far exceeded market expectations, with jobs increasing by 256,000 and the unemployment rate dropping to 4.1%.
Data shows that the labour market remains resilient, providing important support for the economy to maintain solid growth. After the release of the non-farm payrolls data, the dollar index rose sharply higher, with the price of gold see some downward pressure but recovered before close.
As the non-farm payrolls data dampened expectations of interest rate cuts, U.S. stocks closed lower on Friday, with all three major stock indexes down more than 1.5%, the Dow down nearly 700 points, and U.S. bond yields soaring.
Economists at Bank of America, Citi, and Goldman Sachs cut their forecasts for further Fed rate cuts after the stronger-than-expected nonfarm payrolls data. Bank of America previously expected two rate cuts this year of 25 basis points, and now believes that there will be no rate cut instead of a rate hike.
Goldman Sachs Asset Management’s head of fixed-income investment, Lindsay Rosner, said December’s report did not provide an opportunity for the Fed to cut rates in January.
Typically, gold prices come under pressure when U.S. Treasury yields rise and the dollar strengthens. This week, the U.S. dollar index is on track for a sixth week of gains. At the same time, the 10-year U.S. Treasury yields near the highest level since last April.
Lien pointed out that the gold price movement reflects broader risk aversion in the equity market. Traders are concerned about rising US bond yields and the impact of borrowing costs and growth on the economy. Gold is expected to remain more volatile in 2025 as it remains in a tug-of-war between U.S. monetary policy and safe-haven demand, but Lien said investors should wait for a more substantial correction to buy gold, for example, when prices approach near $2,600.
While a stronger dollar and rising bond yields pose a risk to gold in the short term, Lien said she expects safe-haven demand to dominate this year. The risk of a trade war, tariffs, and all the geopolitical uncertainty will keep investors on edge. This will bring continued risk to the stock market, which in turn favours gold.
Gold as the “ultimate safe-haven asset” is being bought by more and more investors, from central banks to individual investors.
From the price trend point of view, if gold test the support level of about $2500, investors do not need to panic. On the upside, Lien believes that gold has the ability to surge to $3,000 an ounce. In 2025, investors will continue to see gold perform strongly in the so-called headwinds of rising U.S. Treasury yields and a stronger U.S. dollar.
