Gold price eyes potential rebound at $2,600 amid central bank demand
Gold price tests $2,633.60 support level, analysts eye potential reversal
Gold's price performance this year has been remarkable, maintaining a 29% gain and outshining the S&P 500. However, according to recent price action, the metal faces hurdles in its bullish run.
Following a decline from the double top at $2,720, gold extended its decline on December 17, shedding 1% to test the $2,633.60 level, its lowest in six days, with the psychological $2,600 support now coming into focus. Analysts see this level, aligned with the 100-day EMA, as a potential pivot for a reversal into upward price movement. Meanwhile, broader market trends and central bank activity continue to paint a supportive long-term picture for the precious metal.
Gold price dynamics (November-December 2024). Source: TradingView.
Gold is now trading at $2,645 in the December 18 European session. Despite the downtrend, the hourly RSI has been on an upward path, surpassing the mid-50 level, a potential signal of recovering bullish momentum.
IMF’s central bank data boost gold price long-term outlook
Looking at macroeconomic drivers, central bank demand remains a cornerstone of gold's outlook. October marked the highest net purchases by central banks this year, with the International Monetary Fund revising 2023’s expected acquisitions to 982 metric tons, up from 900 metric tons. While this is lower than the previous two years, it still far exceeds the annual average of 500 metric tons since 2011. Projections for 2025 suggest another 900 metric tons will be added, reflecting continued efforts to diversify reserves and reduce reliance on the US dollar.
Geopolitical uncertainties, including the Russia-Ukraine conflict and Middle East tensions, continue to drive investor demand for gold as a hedge. Coupled with expectations of a weaker US dollar and a Federal Reserve pivot to rate cuts, beginning with an anticipated 25 basis point reduction this week, gold's appeal as a non-yielding asset is likely to strengthen. As such, analysts remain bullish for the next 12 months, forecasting gold to reach $2,900 per ounce by the end of 2025.
Gold (XAU/USD) dropped 3% below the 100 EMA, a key resistance level, after forming a double top pattern last week. This was due to rising US Treasury bond yields and a stronger US Dollar ahead of the Federal Reserve's policy decision.
