Despite the rise in US bond yields, gold prices continue to hold their ground. The sluggish trading during holidays may highlight a larger and more positive outlook for the gold market.

After Christmas, the US market opened, and the 10-year US Treasury yield rose to over 4.6%, reaching its highest level since May. Meanwhile, the US dollar index remains above 108 points. However, despite these two major unfavorable factors, the gold market is still able to stand firm.

Some analysts warn investors not to search for trends during this holiday season, as liquidity is extremely low and some major markets such as London are still closed due to the Christmas holiday.

Other analysts have pointed out that breaking the negative correlation between US bond yields and gold may be a key theme for investors to focus on in 2025. Traditionally, the gold market has been sensitive to the rise in US Treasury yields, as it increases the opportunity cost of gold as a non yielding asset. Some analysts suggest that the 10-year Treasury yield continues to respond to expectations that rising inflation will force the Federal Reserve to limit its monetary policy measures next year.

Last week, the Federal Reserve stated at its last monetary policy meeting of 2024 that it expects to only cut interest rates twice next year. Before the meeting, the market expects to cut interest rates four times.

Tom Bruce, a macro investment strategist at Tanglewood Total Wealth Management, recently stated that he believes the 10-year US Treasury yield is at the lower end of the range and thinks it could easily break through 5% by 2025. Bruce is not the only one who is bullish on US bond yields. Fuguo Bank predicts that the yield on 10-year US Treasury bonds will reach 5% in the new year.

Despite the strong economy and stubborn inflation supporting the rise in US bond yields, some analysts point out that the huge debt of the US government may also push up yields. Analysts point out that this is beneficial for gold.

Bank of America's fixed income analysts predict that as the supply of US bonds increases by 2025, US bond yields will rise.

Analysts stated in their 2025 outlook report: "One of the key issues for the US bond market next year is supply-demand balance. With the Republican Party's sweeping victory, the deficit is expected to climb at a more aggressive pace starting from the 2026 fiscal year. We expect the US Treasury Department to start increasing coupon supply again in the second half of 2025 to prepare for greater spending demand. On the demand side, we are optimistic that the buyer base still has a supportive role, but escalating fiscal concerns and inflation risks may complicate this background. However, if investors become more skeptical of 'buying on dips', this balance will deteriorate because they worry that if the Federal Reserve reconsider raising interest rates, inflation may resurface

Some analysts point out that as government debt continues to rise, gold investors do not need to worry about yield increases because there is another driving force in the market.

Commodity analysts point out that central bank purchases of gold have completely changed the market and altered the fundamentals of supply and demand. Most analysts expect that central banks around the world will continue to diversify their reserves and shift away from the US dollar towards gold, which will reduce the impact of US dollar volatility on precious metals.

Some estimates suggest that analysts expect central bank gold demand to remain above the 5-year average of 500 tons by 2025.