gold prices are currently finding renewed support as trading begins this week, with buyers aiming to push prices back above the $2,650 level after a correction from recent highs. On Friday, gold reached a three-week peak of $2,665 before retreating, prompting market participants to reassess their positions.
The uptick in gold prices can be partially attributed to increasing optimism surrounding potential stimulus measures from China. The People’s Bank of China announced over the weekend that it would enhance financial assistance aimed at promoting technological innovation and stimulating consumption, reinforcing its commitment to bolster economic growth. This news has been well-received by gold buyers, especially in light of the strong performance of the Chinese Caixin Services PMI, which reached a seven-month peak of 52.2 in December, exceeding analysts’ expectations. Since China is the largest consumer of gold globally, any positive economic initiatives there are likely to support gold demand.
Additionally, the market sentiment is cautious due to uncertainties surrounding upcoming policy direction from both the new U.S. administration and the Federal Reserve. This wariness is contributing to gold ’s resilience amid firm U.S. Treasury bond yields, which remain at multi-month highs. The U.S. dollar has experienced a pullback, diminishing some of the upward momentum it gained from recent manufacturing data, which has facilitated the recovery of gold prices.
From a technical standpoint, the daily chart indicates a bullish outlook for gold , with the Relative Strength Index (RSI) remaining above the neutral 50 mark. The metal is currently defending the 21-day Simple Moving Average (SMA) at $2,638, following an inability to hold above the stronger resistance at the 50-day SMA of $2,651. If gold prices can maintain support above this level, there is potential to revisit the recent high of $2,665, with the $2,700 threshold also in sight. Conversely, a sustained decline below the 21-day SMA could lead prices towards the 100-day SMA at $2,627, presenting the risk of testing the previous week’s low of $2,596.
