- During Monday’s Asian session, the price of gold rose to $2,645, up 0.52% on the day.
- PBoC resumes gold purchases after a six-month hiatus in November.
- Traders see an 87% chance that the Fed will cut interest rates on December 18.
The price of gold (XAU/USD) is trading with a slight enhance around $2,645 during the early Monday Asian session. Renewed geopolitical tension in the Middle East and expectations of interest rate cuts by the Federal Reserve (Fed) support the yellow metal. On Wednesday, the focus will be on the American Consumer Price Index (CPI) for November.
The People’s Bank of China (PBOC), China’s central bank, resumed purchasing gold from its reserves in November after a six-month break. This, in turn, could drive up the price of precious metals as China is a major gold-consuming country. China’s gold reserves rose to 72.96 million troy ounces at the end of November, up from 72.80 million troy ounces a month earlier.
Continued global uncertainty and ongoing geopolitical tensions in Ukraine in the wake of another major Russian attack continue to drive demand for gold as a safe-haven asset. On Sunday, CNN reported that Syrian President Bashar al-Assad and his family fled to Moscow and were granted political asylum, ending 50 years of brutal dictatorship. The fall of Bashar al-Assad’s regime could lead to a conflict involving regional countries and Turkey, Iran’s envoy to Syria said on Sunday.
Moreover, the U.S. November jobs report released Friday suggested that the labor market continues to gradually loosen, leaving room for the Fed to cut interest rates in December, which will push up the price of gold as lower rates make it more attractive to hold underperforming gold. According to CME’s FedWatch tool, financial markets are currently pricing in a nearly 85.1% chance of the Fed cutting interest rates by 25 basis points (bps) on December 17-18.
On the other hand, the potential policy of higher tariffs by Donald Trump, elected in the US, may fuel inflation and convince the US central bank to take a cautious approach to further interest rate cuts. This could weaken the dollar and negatively impact the price of USD-denominated goods.
