Gold News: Fed Rate Cut Bets and China Demand Propel Prices Higher

Bullish Momentum Seen Above Key Moving Averages

Gold prices climbed sharply on Tuesday, breaching the 50-day moving average at $2668.59, a move fueled by trend-following traders and buy stops. This level now acts as support, alongside the 50% Fibonacci retracement level at $2663.51. Should the bullish momentum persist, gold prices may target the Fibonacci level at $2693.40. While initial selling pressure at this level is expected, a breakout could drive prices toward $2721.42, a key resistance marked by the November 25 peak.

Conversely, failure to hold support at $2663.51 could trigger a correction, with prices likely retreating to the $2629.13-$2607.35 range.

At 12:25 GMT, XAU/USD is trading $2677.05, up $16.73 or +0.63%.

Fed Rate Cut Bets Lift Gold Prices

Gold’s appeal was buoyed by growing optimism for a Federal Reserve rate cut in December, reinforced by Friday’s U.S. jobs report. Traders now assign an 86% probability to a 25-basis-point cut, up from 73% last week, according to the CME FedWatch tool. The precious metal typically performs well in low-interest-rate environments, as lower yields reduce the opportunity cost of holding non-yielding assets like gold.

Investors are closely monitoring the U.S. Consumer Price Index (CPI) and Producer Price Index (PPI) data due Wednesday and Thursday, respectively. A stronger-than-expected CPI print could temper expectations for further Fed cuts beyond December, potentially capping gold’s gains.

China Resumes Gold Buying

China’s central bank resumed gold purchases in November after a six-month hiatus, increasing its reserves to 72.96 million fine troy ounces. This move comes as Beijing signals a shift to an “appropriately loose” monetary policy, with plans for a more proactive fiscal approach in 2024. The resumption, following an 18-month buying streak that paused in May, suggests sustained interest from the People’s Bank of China (PBOC) despite gold’s elevated price levels. This renewed demand could bolster prices, particularly if Chinese investors follow suit.

Geopolitical Tensions Drive Safe-Haven Demand

Geopolitical risks, including escalating tensions in the Middle East, provided additional support for gold. Reports of Israeli forces advancing in southern Syria and conducting strikes near Damascus underscored gold’s role as a safe-haven asset during times of instability.

Market Forecast: Bullish Outlook with Key Risks

Gold prices are expected to remain bullish in the short term, targeting $2693.40, with a breakout setting the stage for $2721.42. However, hotter-than-anticipated U.S. inflation data could challenge this outlook by curbing expectations for prolonged Fed easing. Elevated geopolitical risks and China’s renewed gold purchases are likely to provide underlying support. Traders should watch key support at $2663.51 for signs of a potential reversal.