Gold price continues to maintain its upward momentum, rising for the third consecutive session on Thursday. The precious metal has experienced an impressive 27% gain in 2024, marking its best performance since 2010. This surge has been attributed to US monetary easing, geopolitical tensions, and record central bank purchases. However, Gold may face challenges ahead due to the Federal Reserve’s expected hawkish shift in its monetary policy stance for 2025.
The non-yielding nature of Gold may encounter headwinds as the Fed is projected to take a more cautious approach towards further rate cuts, signaling a change in its monetary policy stance. This shift is influenced by uncertainties surrounding potential policy changes under the incoming Trump administration’s economic plans. Despite these challenges, geopolitical tensions in the Middle East and the Russia-Ukraine conflict are expected to continue supporting Gold as a safe-haven asset in the near term.
The US Dollar Index (DXY) has retreated from multi-year highs, providing support for dollar-denominated Gold as the softer US Dollar makes it more affordable for buyers using foreign currencies. Gold, offering no yield, could have faced challenges as the 10-year US Treasury bond yield rose to 4.58% on Tuesday. Investors are closely monitoring a potential recovery in China’s economy, which could fuel Gold demand following President Xi Jinping’s pledge to prioritize growth in 2025.
Gold price’s technical analysis indicates a bullish shift in short-term momentum as it surpasses the nine- and 14-day Exponential Moving Averages (EMAs). The XAU/USD pair may explore the area around the psychological resistance of $2,700.00, with further support around its monthly low of $2,583.39. Central banks, the biggest Gold holders, play a significant role in supporting their currencies by diversifying reserves and buying Gold to enhance perceived economic strength.
Gold has a historical significance as a store of value and medium of exchange, with its role evolving into being a safe-haven asset during turbulent times. The precious metal is widely viewed as a hedge against inflation and depreciating currencies, making it a popular investment choice. Central banks have been increasing their Gold reserves, with emerging economies such as China, India, and Turkey leading the trend. Gold’s inverse correlation with the US Dollar and US Treasuries makes it an attractive asset for diversification during times of economic uncertainty.
