Analysts Believe China Will Continue to Serve As the Key Bullish Catalyst for Gold Markets
Before Federal Reserve’s last monetary policy meeting in 2024, investors can clearly feel the cautiousness in the gold market. Spot gold traded at $2,651.67 an ounce before the close on Monday (December 16), while gold futures contracts in New York traded at $2,673.60 an ounce. The U.S. 10-year Treasury yield fell 0.2% on Monday, help to support gold prices.
Gold is up about 29% so far this year, on track for its biggest annual gain since 2010.
StoneX analyst Rhona O ‘Connell said the economic and political backdrop is generally positive for gold, but if the Fed signals a pause in rate cuts after December, that could limit the upside.
Nitesh Shah, commodity strategist at WisdomTree, said the continued presence of geopolitical risks is also one of the factors driving gold’s strength. China’s central bank, a key player in the global gold market, has resumed buying.
Vladimir Zernov, market analyst at FX Empire, said on Monday that China’s central bank resumed gold purchases in November after a six-month pause, and that China is likely to continue adding to its gold reserves ahead of Trump’s trade war. Zernov noted that China has been waiting for gold prices to fall for as long as six months. Clearly, a correction to the $2,600 level was enough to entice the PBOC back into the market.
China’s central bank increased its gold reserves by 160,000 ounces last month to 72.96 million ounces, according to official data. Analysts noted that aggressive U.S. tariffs have become a key catalyst for the gold market, as central banks have begun to diversify their foreign exchange reserves to reduce their reliance on U.S. Treasuries.
Zernov believes another round of gold buying by the Chinese central bank could last for months. He noted that it was interesting that gold prices did not jump immediately after the PBOC resumed buying, and it appeared that some traders were willing to take profits ahead of the Fed’s decision.
Analysts concluded that in the long term, central bank purchases will continue to be a key catalyst for a bullish gold market. China’s central bank has returned to the market, which will provide additional support for gold prices. While gold does not have enough time to reach the psychologically important $3,000 level before the end of the year, it is quite possible to test this level in 2025.
Source: https://nai500.com