Gold remains bid favoured safe-haven demand, China buying

• Gold rally maintains its positive momentum intact fuelled by buying from China and safe-haven flows.
• The US Dollar’s moderate recovery is weighing on Gold.
• XAU/USD’s technical picture remains positive with price action standing above the last two week’s trading range.

Gold (XAU/USD) maintains a mild bullish tone on Tuesday. The tone shift by China’s Politburo, vowing further economic stimulus to support growth, and the resumption of Gold purchases by the People’s Bank of China (PBoC) are acting as a tailwind for the precious metal.

Other sources of support for Gold are the safe-haven flows triggered by the uncertainty in the Middle East, after the fall of Bashar al-Assad’s regime in Syria, and the political deadlocks in France and Germany.

Finally, growing bets that the Federal Reserve (Fed) will cut rates next week keep US yields close to multi-week lows, and provide additional support to the yieldless metal.

Daily digest market movers: A somewhat stronger Dollar is weighing on Gold’s recovery

• China’s PBoC reported buying 160,000 ounces in November after a six-month pause. This has boosted expectations of further Gold appreciation and will likely underpin speculative demand for Bullion.
   
• In Syria, the diverse rebel factions are starting negotiations to form a government while foreign powers like Israel and Turkey take positions. The increasing uncertainty in an already volatile region will underpin demand for the safe-haven Gold.
   
• The US Dollar is trading moderately higher awaiting Wednesday’s Consumer Prices Index (CPI) figures to clarify the Feds’s monetary easing calendar for 2025.
   
• The CME Group’s Fed Watch Tool reveals an 86% chance of a 25 bps Fed cut after the December 17-18 meeting and between two and three more cuts in 2025.
   
• US consumer inflation is expected to confirm that inflation remains sticky above the Fed’s 2% target rate. The headline CPI is expected to have ticked up to a 2.7% yearly rate, from 2.6% in October with the core CPI steady at 3.3% year-on-year.
  

  Technical analysis: XAU/USD hovers right above previous range top

  Gold rally is losing steam, with the US Dollar coming up on Tuesday but it remains steady above the top of the last two week’s trading range at $2,660.

  Above here, the next target would be the $2,690 intra-day level and the November 24 high at $2,720. A bearish reaction below the mentioned $2,660 would bring the December 9 low at $2,630 back into focus, ahead of the channel bottom (November 26 and December 5 lows) at $2,605.

  XAU/USD 4-Hour Chart

  

   

  Gold FAQs

  Gold has played a key role in human’s history as it has been widely used as a store of value and medium of exchange. Currently, apart from its shine and usage for jewelry, the precious metal is widely seen as a safe-haven asset, meaning that it is considered a good investment during turbulent times. Gold is also widely seen as a hedge against inflation and against depreciating currencies as it doesn’t rely on any specific issuer or government.

  Central banks are the biggest Gold holders. In their aim to support their currencies in turbulent times, central banks tend to diversify their reserves and buy Gold to improve the perceived strength of the economy and the currency. High Gold reserves can be a source of trust for a country’s solvency. Central banks added 1,136 tonnes of Gold worth around $70 billion to their reserves in 2022, according to data from the World Gold Council. This is the highest yearly purchase since records began. Central banks from emerging economies such as China, India and Turkey are quickly increasing their Gold reserves.

  Gold has an inverse correlation with the US Dollar and US Treasuries, which are both major reserve and safe-haven assets. When the Dollar depreciates, Gold tends to rise, enabling investors and central banks to diversify their assets in turbulent times. Gold is also inversely correlated with risk assets. A rally in the stock market tends to weaken Gold price, while sell-offs in riskier markets tend to favor the precious metal.

  The price can move due to a wide range of factors. Geopolitical instability or fears of a deep recession can quickly make Gold price escalate due to its safe-haven status. As a yield-less asset, Gold tends to rise with lower interest rates, while higher cost of money usually weighs down on the yellow metal. Still, most moves depend on how the US Dollar (USD) behaves as the asset is priced in dollars (XAU/USD). A strong Dollar tends to keep the price of Gold controlled, whereas a weaker Dollar is likely to push Gold prices up.