Gold prices rise as China resumes purchases

Gold prices rose to $2,670 per ounce on Monday on increased demand from China. If gold prices rise, they may encounter resistance at $2,716 per ounce, while if gold prices decline, support may be encountered near $2,610 per ounce. 

Gold prices gained strength on Monday as the Bank of China announced over the weekend that it is going to resume gold purchases after a six-month break. 

Geopolitical tensions continue to rise, boosting demand for safe-haven assets. A 60-day ceasefire between Israel and Lebanon has been officially declared. Reports, however, that Israel has been repeatedly violating the ceasefire, propped up gold prices last week. In addition, Russian President Vladimir Putin stated that Russia may use its new nuclear-capable missiles against Ukraine in response to Ukraine’s using long-range missiles to attack Russian territories.

Meanwhile, the civil war in Syria was rekindled last week, further destabilizing the region. In a surprise offensive, Syrian rebels have captured Damascus and toppled the government. President Bashar al-Assad has been forced to flee the country and according to recent reports he has asked for Asylum in Moscow. The Syrian rebel army is currently in charge and political instability in Syria is reigniting geopolitical risks, boosting gold prices. 

Gold prices have been typically directed by the dollar’s movement, as the competing gold typically loses appeal as an investment when the dollar rises. The dollar remained steady on Monday, and the index stayed close to 106.1. US treasury yields gained strength, with the US 10-year bond yield rising from 4.17% to 4.20%. 

In addition, gold prices are supported by increased Fed rate cut expectations. The US Federal Reserve cut interest rates by 25 basis points in November to a target range of 4.50% to 4.75%. Market odds of a December rate cut rose to 90% after the release of robust US labor data on Friday, boosting gold prices. 

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Written by:
Myrsini Giannouli

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