Global gold prices rose during Monday’s trading, as investors await US inflation data this week. This data indicates that there are decisive indicators about the Federal Reserve’s next move. Gold is considered a safe asset that investors resort to in light of changing economic conditions, and therefore its importance increases at these times.
China’s return to support the gold market
One of the reasons contributing to the increase in the price of gold is the resumption of the People’s Bank of China (PBOC) of buying gold last November. This news is considered positive for gold, as it enhances demand for the precious metal. This decision came after the central bank stopped buying gold in May, after an 18-month series of continuous purchases. This resumption could increase Chinese demand for gold, which had declined after the cessation of purchases.
IG Markets Strategic Analyst, Yip Jun Rong, explained that this development will enhance price support in global markets. It is expected that the increase in China’s gold reserves will lead to more stability in prices, especially in light of global economic fluctuations.
China’s strategy towards gold
OCBC analysts pointed out that China’s decision to increase gold reserves after US President Donald Trump’s election victory reflects the proactive approach of the Chinese central bank. This decision aims to maintain economic stability amid changing global conditions. This move shows that China is seeking to enhance its gold reserves at a time when the world is witnessing great economic fluctuations.
The impact of US inflation on gold prices
In the same context, US inflation data is expected to play a major role in determining the next direction for gold. If the data shows higher-than-expected inflation, it may increase expectations that the Federal Reserve will raise interest rates faster, which may pressure gold prices.
Factors supporting gold prices
The year 2024 witnessed a record rise in gold prices, driven by several major factors. The most prominent of which was the strong buying by central banks around the world, which sought to boost their reserves of the precious metal. The monetary easing policies pursued by many central banks also contributed to the rise in gold prices. In addition, geopolitical tensions played an important role in attracting investments to XAU , which made it record its best annual performance since 2010, with an increase of nearly 28% so far.
XAU is considered a safe asset that investors resort to in times of economic and political crises. The precious metal is the first choice in environments witnessing low interest rates, as investors seek alternatives to other assets that may not provide the same security. Under these conditions, XAU is performing strongly, which enhances its status as a safe haven.
US interest rate cut expectations
In the same context, investors are awaiting the release of US inflation data next Wednesday. This data will provide important signals regarding the next steps of the US Federal Reserve. Expectations indicate that the Federal Reserve may cut interest rates by 25 basis points during its December meeting. According to the US interest rate forecast monitoring tool on the Investing Saudi Arabia website, markets indicate an 85.1% probability of this cut, which is higher than 71% the day before. This indicates a strong possibility of easing US monetary policy, which is in gold’s favor.
Geopolitical tensions and their impact on gold
On the other hand, geopolitical factors are becoming increasingly important in supporting XAU prices. For example, the Middle East has witnessed an escalation in tensions, especially after the Syrian opposition took control of the capital, Damascus.
Gold at settlement on Friday: Price movements and influencing factors
Gold prices rose during trading on Friday, supported by improving labor market data in the United States. This improvement strengthened expectations that the Federal Reserve might cut interest rates in the near future.
US Labor Market Data
According to data from the US Department of Labor, the world’s largest economy added 227,000 jobs during the month of November, exceeding expectations that indicated the addition of 214,000 jobs. Revised October data show 36,000 jobs, reflecting an improvement in the labor market situation. However, the unemployment rate rose to 4.2% compared to 4.1% in the previous month, which may reflect some challenges in the labor market despite the growth in the number of jobs.
Gold Price Movements
At the settlement of trading, XAU futures for February 2025 delivery rose by 0.4%, or $11.2, to reach $2,659.6 per ounce. However, despite this increase, XAU recorded weekly losses of 0.8%. In contrast, spot XAU rose 0.44% to $2,644 per ounce, while gold futures rose 0.25% to $2,666.
Impacts on the Dollar
While gold prices rose, the US dollar saw moderate movements, with the dollar index rising 0.05% to 105.79 points. This slight increase in the value of the dollar was not enough to significantly pressure gold prices, but on the contrary, expectations of a rate cut contributed to increasing the attractiveness of XAU as a safe haven.
Other Metal Prices
As for other metals, silver stabilized at $30.95 per ounce, while platinum remained stable at $930.52. On the other hand, palladium witnessed a rise of 0.8% to $963.74 per ounce, reflecting a significant improvement in this precious metal.
