In the current market scenario, gold is experiencing a recovery, with geopolitical concerns and China’s actions playing significant roles.
The Middle East’s growing uncertainty following the developments in Syria, such as the fall of the Bashar al-Assad regime, has led to a resurgence in gold’s safe-haven allure. Additionally, the People’s Bank of China (PBoC) has reignited gold purchases after a six-month hiatus. In November, China’s gold reserves swelled by 160,000 ounces, reaching 72.96 million ounces from 72.80 million ounces, fueling expectations of further appreciation and bolstering demand for the precious metal.
The US Dollar, on the other hand, is facing hesitation. Despite strong US labor data, which showed the addition of 227,000 new jobs in November, exceeding the expected 200,000, the uptick in the unemployment rate to 4.2% from 4.1% has kept hopes of a Federal Reserve (Fed) rate cut alive. The CME Group’s Fed Watch indicates an 87% probability of a 25 basis point rate cut by the Fed next week, a significant increase from less than 70% last week. This, combined with a mild risk appetite, is curbing the US Dollar’s upward momentum.
On Monday’s early European session, the gold price (XAU/USD) is inching higher. Technically, it is displaying an ascending bullish momentum, building on last week’s lows. It is now approaching a crucial resistance area at $2,665. If it manages to breach this level, the next targets could be the intra-day level of $2,690 and the November 24 high of $2,720. On the downside, the bottom of the relevant channel is at $2,620, and further below, the November 25 low of $2,605 serves as the next support. The benchmark 10-year Treasury yields are also on the rise on Monday, having declined by around 20 basis points in the previous two weeks. This is offsetting the positive influence of the Trump trade and exerting additional pressure on the US Dollar.
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