Gold prices (XAU/USD) have continued their upward trend for the third consecutive session on Thursday, building on a strong 27% gain in 2024, marking the precious metal’s best performance since 2010. This rally has been fueled by a combination of US monetary easing, persistent geopolitical tensions, and record central bank gold purchases.
However, the non-interest-bearing nature of gold may face headwinds as the Federal Reserve (Fed) adopts a more cautious stance toward further rate cuts in 2025, signaling a hawkish shift in its monetary policy. This shift is partly driven by uncertainties surrounding potential economic policy changes under the incoming Trump administration.
Geopolitical tensions, particularly in the Middle East and the ongoing Russia-Ukraine conflict, continue to support gold as a traditional safe-haven asset. Additionally, a World Gold Council survey suggests that central banks are likely to increase their gold purchases in 2025, further bolstering demand for the metal.
US Dollar Retreats, Providing Support for Gold
The US Dollar Index (DXY), which tracks the USD against six major currencies, has retreated from multi-year highs, trading around 108.30. The softer dollar provides support for gold, making it more affordable for foreign buyers. However, gold, which yields no interest, faced some challenges earlier this week as the 10-year US Treasury bond yield rose to 4.58%.
Investors are also closely monitoring China’s economic recovery, following President Xi Jinping’s pledge to prioritize growth. Xi stated in his New Year’s address that China would implement more proactive policies to promote economic growth in 2025. While China’s manufacturing activity showed minimal growth in December, the services and construction sectors have begun to recover, reflecting the effects of policy stimulus.
Geopolitical developments, including a recent drone strike on Kyiv by Russia, continue to fuel safe-haven demand for gold. Meanwhile, Israeli military actions in Gaza have also contributed to ongoing geopolitical risks, adding further support to gold prices.
Technical Analysis: Gold Breaks Above Key EMAs, Eyes $2,700 Resistance
Gold prices are trading near $2,630 per troy ounce on Thursday, with the daily chart suggesting a consolidation phase as the metal moves sideways. However, the price has risen above the nine- and 14-day Exponential Moving Averages (EMAs), indicating a bullish shift in short-term momentum. The 14-day Relative Strength Index (RSI) remains around the neutral 50 mark, signaling balanced sentiment.
The XAU/USD pair could target the psychological resistance level of $2,700, with the next key barrier at the monthly high of $2,726.34, reached on December 12.
On the downside, immediate support is seen at the 14- and nine-day EMAs around $2,626 and $2,624, respectively. Further support lies at the monthly low of $2,583.39, recorded on December 19.
Related Topics:
