PRECIOUS-Perfect storm fuels gold's best yearly performance since 2010 as Trump 2.0 looms

Updates with U.S. midday hours

By Sherin Elizabeth Varghese

Dec 31 (Reuters) - Gold prices were poised for an annual surge of over 26%, their biggest yearly rise since 2010, driven by safe-haven demand and central banks' rate cuts, although the mood could turn more cautious depending on policy shifts under a second Donald Trump presidency.

Spot gold XAU= rose 0.7% to $2,624.44 per ounce as of 12:33 p.m. EST (1733 GMT) on Tuesday and U.S. gold futures GCcv1 gained 0.8% to $2,638.90.

Strong central bank purchases, geopolitical uncertainties and monetary policy easing powered safe-haven gold's record-breaking rally in 2024, driving it to an all-time high of $2,790.15 on Oct. 31.

Analysts expected the factors supporting bullion in 2024 to persist into 2025, though they also cited potential headwinds from Trump policies that could stoke inflation and slow Federal Reserve rate cuts.

"Gold is in a secular bull market, but the direction of travel won’t be as one-directional in 2025 as in 2024," said Nicky Shiels, head of metals strategy at MKS PAMP SA.

"Peak political fear is behind us following Trump’s decisive win ... Central Bank buying trends will continue at a similar pace in 2025, but flows will remain more discreet given the threat of Trump tariffs on countries perceived to be actively de-dollarizing."

Bullion thrives in low-interest-rate environments, acting as a hedge against economic and geopolitical risks. The rally lost momentum in November as the dollar strengthened on "Trump euphoria."

"We think the gold bull market has taken a pause following U.S. presidential elections but should resume in 2025 underpinned by further deterioration in the U.S. labor market, still-high interest rates weighing on growth, and higher ETF demand," said Tom Mulqueen, metals strategist at Citi Global Markets.

Elsewhere, spot silver XAG= fell 0.4% to $28.83 per ounce, palladium XPD= rose 1.1% to $910.45, and platinum XPT= added 0.1% to $904.65.

Silver is headed for its best year since 2020, having added nearly 22% so far. Platinum and palladium are set for annual losses and have dipped over 8% and 17%, respectively.

Citi's Mulqueen sees silver prices rising to $36 per ounce in response to a large market deficit and to Fed rate cuts through 2025. Citing headwinds for industrial demand growth in 2025, he did not expect it to outperform gold.

(Reporting by Sherin Elizabeth Varghese and Swati Verma in Bengaluru; editing by Barbara Lewis and Matthew Lewis)

((sherinelizabeth.varghese@thomsonreuters.com;))