- Gold prices find support from safe-haven demand amid reports that President Joe Biden is considering contingency plans to strike Iran’s nuclear facilities.
- Dollar-denominated gold faces headwinds as the US Dollar Index hovers near its multi-year high of 109.56, touched on Thursday.
- Subdued US Treasury bond yields could provide additional support for non-yielding gold.
Gold prices (XAU/USD) extend gains for a fourth consecutive session on Friday, continuing their stellar performance in 2024, which saw a 27% annual return—the metal’s best since 2010. The rally is driven by robust safe-haven demand amid ongoing geopolitical tensions in the Middle East and the protracted Russia-Ukraine war.
According to Axios, President Joe Biden reportedly discussed contingency plans to strike Iran’s nuclear facilities if Tehran nears developing a nuclear bomb before Donald Trump’s inauguration on January 20. This underscores rising concerns over Iran’s nuclear ambitions during the transitional US administration period.
Meanwhile, a Financial Times report reveals that the People’s Bank of China (PBoC) expects to cut interest rates this year at an appropriate time, fueling speculation about a potential recovery in China’s economy and its impact on gold demand. On Tuesday, President Xi Jinping pledged to prioritize economic growth in 2025 with proactive measures to boost the economy.
China’s National Development and Reform Commission (NDRC) echoed this optimism, outlining plans to expand funding through ultra-long treasury bonds to support key infrastructure programs. The NDRC also expects steady consumption growth to sustain the economic recovery throughout the year.
Daily Digest Market Movers: Gold price supported by safe-haven flows
- US Dollar Strength: The US Dollar Index (DXY) climbed to a multi-year high of 109.56 on Thursday before easing to around 109.20. The Greenback’s strength has limited Gold’s upside, as a stronger USD makes the metal more expensive for international buyers.
- Bond Yields: Subdued yields on 2-year and 10-year US Treasury bonds, at 4.24% and 4.56%, respectively, have provided support for non-yielding assets like Gold by lowering the opportunity cost of holding them
- Fed Policy Outlook: Gold may face headwinds as the Federal Reserve (Fed) adopts a cautious approach to rate cuts in 2025. This hawkish shift is influenced by uncertainty surrounding the economic policies of the incoming Trump administration.
- Central Bank Purchases: Record purchases by central banks have bolstered Gold demand. A World Gold Council survey indicates that major central banks are expected to increase their Gold reserves in 2025, further driving demand.
- China’s Economic Recovery: While China’s manufacturing sector showed minimal growth in December, the services and construction sectors are rebounding. Policy stimulus appears to be taking effect, even as new trade risks loom from tariffs proposed by President-elect Donald Trump
- Geopolitical Risks:
- Russia-Ukraine Conflict: Russia launched a drone strike on Kyiv early Wednesday, killing two people, injuring six others, and damaging buildings in two districts. Explosions rocked the city as Ukraine’s air force warned of incoming drones.
- Middle East Tensions: The Israeli military intensified operations in northern Gaza, with airstrikes in Gaza City’s Shejaia suburb reportedly killing at least eight Palestinians. Medics confirmed casualties, though the Israeli military has not commented on the incident.
Gold price rises above nine-day EMA, signaling bullish momentum
Gold prices (XAU/USD) trade near $2,660.00 per troy ounce on Friday, with technical indicators suggesting a bullish outlook. The daily chart reveals that the metal has climbed above both the nine-day and 14-day Exponential Moving Averages (EMAs), reinforcing upward momentum in the short term. Additionally, the 14-day Relative Strength Index (RSI) has moved above the neutral 50 level, supporting a continued bullish scenario.
Upside targets:
- The XAU/USD pair may aim for the psychological resistance level of $2,700.00.
- Further gains could test the monthly high of $2,726.34, achieved on December 12.
Support levels:
- Initial support lies around the nine-day EMA at $2,635.00 and the 14-day EMA at $2,633.00.
- Deeper support can be found near the monthly low of $2,583.39, recorded on December 19.
Gold’s upward trajectory remains intact, with key levels providing a roadmap for further price action.
XAU/USD: Daily Chart
