Gold prices (XAU/USD) regained some lost ground during Asian trading on Friday, climbing to approximately $2,690 after retreating from a five-week high in the previous session. Investors are now focused on the US Federal Reserve’s interest rate decision next week.
Support for the precious metal may come from increased gold buying by central banks, including the People’s Bank of China (PBoC). In November, the PBoC resumed gold purchases after a six-month pause, raising its reserves to 72.96 million fine troy ounces. This aligns with Beijing’s shift to an “appropriately loose” monetary policy and plans for a more proactive fiscal stance in 2024. Analysts at Goldman Sachs highlighted that the PBoC could increase gold demand during periods of local currency weakness to bolster confidence in the yuan.
Geopolitical tensions in the Middle East are also contributing to gold’s appeal as a safe-haven asset. A recent Israeli airstrike in the Gaza Strip reportedly killed at least 30 Palestinians and injured 50 others, escalating conflict in the region.
However, headwinds for gold remain. Speculation surrounding US President-elect Donald Trump’s potential tariff policies suggests they might drive inflation, possibly prompting the Federal Reserve to adopt a cautious approach to interest rate cuts. According to CME Group’s FedWatch Tool, markets are pricing in a 96.4% likelihood of a 25 basis-point rate cut at the Fed’s December meeting.
The convergence of central bank demand, geopolitical uncertainty, and evolving monetary policy will likely shape gold’s performance in the coming weeks.
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