- Gold prices extend gains, building on a remarkable 27% annual rise, the strongest performance since 2010.
- The precious metal finds support as the US Dollar Index eases from its multi-year high of 108.58, recorded on Tuesday.
- However, non-yielding gold faces potential headwinds from the Federal Reserve’s hawkish monetary policy shift.
Gold price (XAU/USD) extends its rally for a third consecutive session on Thursday, building on its impressive 27% gain in 2024—the strongest annual performance since 2010. The surge has been fueled by US monetary easing, ongoing geopolitical tensions, and record central bank demand.
Despite its strong performance, non-yielding Gold may face pressure as the Federal Reserve adopts a cautious stance on rate cuts in 2025, reflecting a hawkish shift in monetary policy. This shift is influenced by uncertainties surrounding economic strategies under the incoming Trump administration.
Geopolitical risks, including the Middle East conflict and the Russia-Ukraine war, continue to bolster Gold’s appeal as a safe-haven asset. Furthermore, a World Gold Council survey indicates that central banks are likely to increase Gold purchases in 2025, reinforcing demand for the precious metal.
Gold price supported by safe-haven flows amid geopolitical tensions
- The US Dollar Index (DXY), which tracks the value of the US Dollar against six major currencies, eases from multi-year highs, trading around 108.30. A weaker US Dollar has made dollar-denominated Gold more appealing to foreign currency buyers.
- Despite this support, Gold, a non-yielding asset, faces pressure as the 10-year US Treasury yield rose to 4.58% on Tuesday.
- Investors are closely monitoring China’s economic recovery following President Xi Jinping’s pledge to prioritize growth. In his New Year’s address, Xi emphasized proactive measures to boost the economy in 2025, Reuters reports.
- While China’s manufacturing activity showed limited growth in December, recovery in services and construction sectors suggests that recent policy stimulus is beginning to take effect, even as the nation braces for potential trade tensions tied to tariffs proposed by US President-elect Donald Trump.
- Heightened geopolitical risks further bolster Gold’s safe-haven appeal. Reuters reported a Russian drone strike on Kyiv on New Year’s Day, killing two, injuring six, and damaging buildings in multiple districts.
- Simultaneously, tensions escalate in Gaza as Israeli airstrikes in Shejaia reportedly killed eight Palestinians. The Israeli military has yet to comment on the attacks, leaving the identities of the victims unclear.
Technical Analysis: Gold price approaches $2,650 after surpassing nine-day EMA
Gold price trades near $2,630 per troy ounce on Thursday, showing signs of consolidation as the yellow metal moves within a sideways range. The price has climbed above the nine- and 14-day Exponential Moving Averages (EMAs), signaling a potential bullish shift in short-term momentum. Meanwhile, the 14-day Relative Strength Index (RSI) remains near the neutral 50 level, indicating balanced sentiment.
On the upside, XAU/USD may target the psychological resistance at $2,700, followed by the monthly high of $2,726.34, marked on December 12.
Conversely, immediate support is seen at the 14- and nine-day EMAs, around $2,626.00 and $2,624.00, respectively. A deeper pullback could lead the pair toward the monthly low of $2,583.39, recorded on December 19.
XAU/USD: Daily Chart
