How to trade gold when the "big event" of a surge in gold prices of $27 hits
Mainly driven by the resumption of gold purchases by the People's Bank of China after a six-month suspension, coupled with significantly increased market expectations for the Federal Reserve's interest rate cut next week, further boosting bullish sentiment, gold prices hit a two-week high on Monday (December 9), with an increase of over 1%.
Spot gold closed up $27.00, or 1.03%, at $2660.03 per ounce on Monday.
On December 7th, the People's Bank of China released data stating that China's gold reserves were 72.96 million ounces at the end of November 2024 and 72.8 million ounces at the end of October.
Bart Melek, head of bulk commodity strategy at TD Securities, said: "The most important factor is the news that the People's Bank of China announced the resumption of gold purchases. The market is optimistic that other central banks may follow up and restart record breaking purchases."
China's resumption of gold purchases may further support its domestic investment demand. As of April this year, the People's Bank of China has increased its gold reserves for 18 consecutive months, helping to support the strengthening of gold prices.
Strong central bank buying is one of the main supporting forces for the record high rise in gold prices this year, in addition to loose monetary policy and geopolitical tensions.
Analyst Guillermo Alcala pointed out that the increasing uncertainty in the Middle East and China's purchases have supported the recovery of gold. The gold price continued its upward trend on Monday, breaking through the key $2665/ounce range at one point and needing confirmation of a channel breakthrough.
Alcala wrote that after the fall of the Bashar al Assad regime in Syria, the uncertainty in the Middle East has been increasing, and the safe haven status of gold is favorable for the price of gold. In addition, the People's Bank of China announced last weekend that it would resume gold purchase in November after a six-month suspension, which further boosted gold prices.
Analyst Rhona O'Connell said, "In the medium term, the tailwind effects of geopolitical and banking pressures will outweigh any headwinds
The Chicago Mercantile Exchange Group's "Federal Reserve Watch Tool" shows that there is an 87% chance of the Fed cutting interest rates by 25 basis points next week, far higher than last week's less than 70%.
In a low interest rate environment, zero yield gold performs strongly and typically attracts investors during periods of political and economic instability.
Pay attention to the major issue of China's trade account data on Tuesday
Analyst Eren Sengezer pointed out that market participants will closely monitor China's November trade account data during the Asian session on Tuesday. If the trade surplus significantly increases, it may help the gold price rise in an immediate response.
On November 7th, the General Administration of Customs of China released data showing that in US dollar terms, China's exports in October increased by 12.7% year-on-year to 309.06 billion US dollars, jumping to a 27 month high, with the previous value increasing by 2.4%; Imports decreased by 2.3% year-on-year to 213.34 billion US dollars, with a previous value increase of 0.5%; The trade surplus was 95.73 billion US dollars, with a previous value of 81.71 billion US dollars, reaching the third highest in history.
How to trade gold?
Analyst Guillermo Alcala pointed out that as gold prices rebound from last week's low, the bullish momentum for gold is strengthening on Monday.
Alcala stated that with favorable fundamentals, gold prices are currently working hard to confirm breaking through the top of the channel of $2665 per ounce over the past two weeks. Once it is confirmed to break through the above level, the next target for gold prices will be $2690 per ounce, followed by the November 24th high of $2720 per ounce.
(4-hour chart of spot gold)
On the downside, Alcala added that the bottom of the above channel is $2620 per ounce, which constitutes the first support. If it falls below this level, the next support level for gold prices will be the November 25th low of $2605 per ounce.
Tips:This page came from Internet, which is not standing for FXCUE opinions of this website.
Statement:Contact us if the content violates the law or your rights