Gold price forecast: Fed policy and China strategy boost safe-haven demand
Gold breaks $2,700 as Fed, China factors drive bullish momentum
Gold’s recent price rally has not only caught the market’s attention but has also broken key resistance levels, setting the stage for potentially more gains in the coming weeks. After surging past the critical $2,700 mark in London bullion trading on Wednesday, the precious metal extended its gains, continuing its four-day streak of upward momentum.
This recent rise has seen gold climb by almost 4% in just one week, reaching a five-week high.
Gold price dynamics (September-December 2024). Source: TradingView.
The primary catalyst behind gold’s surge is a combination of global economic factors, including an anticipated shift in U.S. Federal Reserve policy and China’s economic strategy. The likelihood of the Fed cutting interest rates by 0.25 percentage points at its upcoming December meeting has pushed market expectations towards a near 100% certainty. This prospect, along with weaker-than-expected inflation data from the U.S., has strengthened the appeal of gold as an alternative investment in a low-interest-rate environment.
Adding to the bullish sentiment is China’s economic strategy. While the Chinese Yuan weakened slightly against the U.S. dollar, the rumours surrounding Beijing’s plan to allow the currency to fall further in 2025 in a bid to enhance export competitiveness have further bolstered gold’s appeal. As the Yuan weakens, investors are increasingly seeking safe-haven assets like gold to hedge against the potential risks of currency devaluation.
Gold price analysis: $2,700 resistance break sets stage for further gains
Despite gold’s impressive rally, some technical indicators suggest caution. The Relative Strength Index (RSI) is currently in overbought territory, signaling that the pace of gains might slow down. However, the broken $2,700 resistance level is now acting as support, reinforcing the idea that the bullish trend could persist.
Looking ahead, experts remain optimistic about gold’s future. Max Layton, Citi’s global head of commodities research, points out that growing demand from central banks and affluent investors suggests the bull market for gold could continue.
After a three-day winning streak, gold managed a 2.77% gain, towards November 25th high. Expectations of the U.S. CPI data to show modest inflation growth contributed to the sustained rally
