Gold Update: China's Stimulus Limits Bearish Action

• Gold prices have risen by 6% since November and continue oscillating within an upward trend.
• China has increased its gold purchases over the past month, creating a bullish factor that has pushed the price above $2,600.

Gold prices have shown a 6% growth since November, reaching the $2,700 per troy ounce level once again. The current upward trend has strengthened following recent announcements of economic growth from China.

China's Role

Recently, the People's Bank of China resumed its gold acquisitions after a six-month pause, increasing its reserves from 72.80 million troy ounces in October to 72.96 million troy ounces in November. This move has been a key catalyst for raising expectations of increased demand in 2025, pushing XAU/USD upwards from the $2,600 level.

The latest data published by the World Gold Council shows that China ranks 5th among countries with the largest gold reserves globally. During Q3 of this year, total reserves were reported at approximately 2,264 tonnes. For this reason, China's statements, and actions to increase gold purchases in the short term are key factors that could play an important role in demand development for the following year. That said, gold may maintain a solid upward trend as the Asian giant continues its acquisitions.

Table of Gold Reserves by Country: Q3 2024

Source: Gold.org / Data: IMF, World Bank

Gold as a Safe-Haven Asset

Gold remains one of the world's most prominent safe-haven assets, which explains the trend among central banks to increase their reserves. However, the safe-haven role, as its name implies, is tied to panic events occurring globally that can affect economic behavior. Currently, we observe a power transition in Syria, political uncertainty in France, and a new tariff package with Trump's arrival to power.

Such events have, to some extent, driven appetite for gold in recent sessions. As these types of events continue to appear, gold could find a significant catalyst to remain above the critical floor of $2,000 per ounce.

Gold Technical Forecast

Gold has maintained a steady trend since mid-February of this year, increasing in value by 40% and reaching a price near $2,800 per ounce. Recent events have brought the price back to the key $2,700 level.

Source: Tradingview

• Neutral Indicators: For over 15 days, the ADX indicator line has shown a consistent decline, now positioned below the 20 level. This indicates that the average volatility of the last 14 sessions is in a neutral zone, reducing the bullish trend strength. That said, a lack of buying momentum is anticipated in the upcoming sessions.

   

• Triangle Formation: Recent movements on the daily chart have followed a triangle formation, as recent sessions have exhibited smaller movements compared to previous weeks. In this context, it is essential to consider the upper and lower levels marked by the triangle's crossing lines at its endpoint.

   

  The upper level represents a key resistance for gold at $2,700, and if surpassed, it could generate short-term bullish movements. Conversely, the lower level lies at the base of the triangle, around $2,600, where bearish oscillations near this level could break the continuation pattern of the current trend.

   

• Key levels:
  • $2,800: A critical resistance zone corresponding to the all-time high price. Breaching this level could sustain the long-term bullish trend and maintain a buying perspective over time.
  • $2,500: The most significant support on the chart, where a breach could jeopardize the current bullish trend and consolidate bearish positions.