Gold prices climbed to their highest in over two weeks, driven by China’s renewed gold purchases and escalating geopolitical tensions following the power shift in Syria. Analysts, however, caution against over-optimism.
For the past two trading sessions, gold has experienced a significant rally, buoyed by haven demand and expectations of further rate cuts by major central banks. As of 5:12 am CET on Wednesday, Comex gold futures rose 0.71%, reaching $2,737 (€2,603) per ounce.
The recent surge follows a weekend political upheaval in Syria, where the rebel army captured Damascus, ending Assad’s 50-year regime. This development, alongside ongoing Middle East conflicts, has increased global political and economic uncertainties, boosting gold’s safe-haven appeal. Similar market movements were observed in late November during an escalation in the Ukraine-Russia war.
In China, the People’s Bank resumed gold purchases in November after a six-month pause, with officials pledging more proactive fiscal policies for 2025. Analysts predict additional easing measures, including rate cuts and increased government borrowing, to address economic pressures. Ray Jia of the World Gold Council remarked that China’s gold demand is likely to stabilize in 2025, supported by these fiscal and monetary strategies and pressures from trade tensions.
This week, major central banks are expected to implement further monetary easing, with the Bank of Canada anticipated to cut rates by 50 basis points and both the Swiss National Bank and the European Central Bank expected to lower rates by 25 basis points each. Falling rates enhance gold’s attractiveness by reducing the opportunity cost of holding the non-yielding asset.
In the U.S., inflation data for November, set to release this week, will be crucial for the Federal Reserve’s policy decisions. Analysts project the annual Consumer Price Index (CPI) to tick up to 2.7% from 2.6% in October, reinforcing expectations of a 25-basis-point rate cut in the coming week.
As markets watch these developments closely, gold remains a focal point for investors seeking refuge amidst economic and political uncertainties.
