03 Jan 2025

Gold prices are bolstered by safe-haven demand following Joe Biden's remarks regarding contingency plans for targeting Iran's nuclear facilities. However, gold priced in dollars may face challenges as the US Dollar Index hovers near its multi-year peak of 109.56, achieved on Thursday. Additionally, the non-yielding nature of gold may find support due to the continued low yields on US Treasury bonds.

Gold prices (XAU/USD) have risen for the fourth consecutive session on Friday, continuing a remarkable trend in 2024 with an increase surpassing 27%, marking the metal's most significant annual gain since 2010. This ongoing ascent is primarily driven by robust safe-haven demand, fueled by ongoing geopolitical tensions in the Middle East and the enduring conflict between Russia and Ukraine.

As reported by three sources to Axios, US President Joe Biden has allegedly engaged in discussions regarding contingency plans to target Iran’s nuclear facilities should Tehran make notable advancements in its nuclear bomb development prior to Donald Trump’s inauguration on January 20. These conversations underscore the growing apprehension regarding Iran’s nuclear intentions during the transition between administrations.

A report from the Financial Times indicated that the People's Bank of China (PBoC) is considering an interest rate reduction this year at a suitable moment. Traders are keenly observing the potential recovery of China’s economy and its implications for gold demand. On Tuesday, President Xi Jinping reiterated his commitment to prioritizing economic growth, vowing to implement more proactive measures to strengthen China's economy by 2025.

The National Development and Reform Commission (NDRC), China's state planner, expressed confidence in achieving continued economic recovery in 2025. In a statement on Friday, it highlighted plans to significantly increase funding from ultra-long treasury bonds to support "two new" programs, with expectations for steady consumption growth throughout the year

Daily Digest Market Movers: Gold price gains support due to safe-haven flows

The US Dollar Index (DXY), which assesses the performance of the US Dollar (USD) against six prominent currencies, reached a new multi-year peak of 109.56 on Thursday before slightly retreating to approximately 109.20 at the time of this writing. The robust performance of the Greenback may have constrained the upward potential of dollar-denominated Gold, as a stronger USD increases the cost of Gold for purchasers using other currencies.

Gold, which does not yield interest, may have found some support due to the relatively low yields on 2-year and 10-year US Treasury bonds, currently at 4.24% and 4.56%, respectively. Diminished bond yields lower the opportunity cost associated with holding Gold, thereby enhancing its appeal to investors.

However, the non-yielding Gold may encounter obstacles as the Federal Reserve (Fed) indicates a more cautious outlook regarding rate cuts for 2025, hinting at a transition towards tighter monetary policy. This hawkish stance is influenced by uncertainties related to the prospective economic policies of the incoming Trump administration.

Unprecedented purchases by central banks have strengthened the demand for the yellow metal. A survey conducted by the World Gold Council indicates that major central banks are likely to increase their Gold acquisitions in 2025, further elevating demand for this precious asset.

In China, while manufacturing activity exhibited only slight growth in December, the services and construction sectors have shown signs of recovery. This data suggests that policy stimulus is beginning to have a positive effect on certain sectors, as China braces for new trade challenges arising from tariffs proposed by US President-elect Donald Trump.

According to Reuters, Russia executed a drone strike on Ukraine's capital, Kyiv, on New Year's Day early Wednesday, resulting in two fatalities, at least six injuries, and damage to buildings across two districts. Explosions reverberated through the morning sky as Ukraine's air force issued alerts regarding incoming drones.

Simultaneously, the Israeli military continued its operations in northern Gaza, conducting strikes in a suburb of Gaza City on Wednesday, as reported by medical sources. Airstrikes in Shejaia, a suburb of Gaza City, resulted in the deaths of at least eight Palestinians.

Gold price rises above nine-day EMA, reinforcing an up-leg scenario

Gold price trades near $2,660.00 per troy ounce on Friday, with the daily  signaling an emergence of a bullish bias. The metal price has climbed above the nine- and 14-day Exponential Moving Averages (EMAs), indicating a strengthening bullish momentum in the short term. Moreover, the 14-day Relative Strength Index (RSI) has risen above the 50 level, further supporting the development of a bullish bias.

On the upside, the XAU/USD pair may explore the area around the psychological resistance of $2,700.00, followed by the next barrier at its monthly high of $2,726.34, reached on December 12.

The XAU/USD pair may test initial support around the nine- and 14-day EMAs at $2,635.00 and $2,633.00, respectively. Further support appears around its monthly low of $2,583.39, recorded on December 19