Gold price breaks out, will the increase last?

Gold prices recover strongly

Since the beginning of the week, the world gold price has continuously increased. As of 10:04 (EST), the gold futures price was trading at 2,710.8 USD/ounce, up nearly 1% on the day.

At the time of writing at 0:15 a.m. on December 11 (Vietnam time), the spot gold price listed on Kitco was at 2,693.3 USD/ounce, up 27 USD/ounce compared to the opening of the previous trading session.

Gold's recent rally began on Monday as traders reacted to news that the People's Bank of China bought 5 tonnes of gold in November, marking its first purchase in six months.

Will the rally last?

Despite the strong gains in gold, some analysts say investors still need to make up for the losses from last month’s sell-off. In a recent interview with Kitco News, Christopher Vecchio, head of futures and forex at Tastylive.com, said that February gold futures need to break above $2,725 to maintain their near-term upside.

Gold’s rally since Monday has taken it above its 20-day and 50-day moving averages, said David Morrison, senior market analyst at Trade Nation. While technical momentum remains slightly negative, Morrison said it is showing signs of improvement.

“Bulls will be hoping that this momentum continues to build, helping push prices back above $2,700 an ounce quickly,” he said. “If that happens, it would be an impressive recovery from the lows of less than a month ago. However, bulls will also need gold to hold support at $2,600 an ounce during downside corrections.”

Ricardo Evangelista, senior analyst at ActivTrades, said gold continued to benefit from geopolitical uncertainty as well as expectations that the US Federal Reserve (FED) will cut interest rates after its monetary policy meeting next week.

However, Mr. Evangelista also highlighted a major challenge for gold this week as investors focus on persistently high inflation.

“The US dollar has regained strength following better-than-expected non-farm payrolls data last Friday, creating a challenge for gold prices due to the inverse relationship between the two assets,” he said. “Analysts expect consumer prices to rise, which could add to the dollar recovery narrative and put pressure on gold. Conversely, if inflation is lower than expected, gold prices could be supported.”

Meanwhile, Naeem Aslam, chief investment officer at Zaye Capital Markets, said higher-than-expected inflation is not expected to deter the Fed from cutting rates next week. However, it could change expectations for interest rates in 2025.