(Kitco News) - News that China’s central bank is back in the gold market continues to inject fresh energy into the precious metals sector, with gold managing to rebound to $2,700 an ounce.
However, some analysts note that bullish investors still have work to do to undo the damage caused by last month’s sharp selloff and ensuing volatility. In a recent interview with Kitco News, Christopher Vecchio, Head of Futures & Forex at Tastylive.com, said February gold needs to push above $2,725 to maintain its short-term bullish advantage.
As of 10:43 a.m. EST, February gold futures were trading at $2,710.80 an ounce, up nearly 1% on the day.
David Morrison, Senior Market Analyst at Trade Nation, observed that gold’s rally since Monday has pushed prices above their 20-day and 50-day moving averages. Although technical momentum remains slightly negative, Morrison noted it is starting to improve.
“The bulls will be hoping that this upside momentum builds further and helps to push prices back above $2,700 relatively quickly,” he said. “If so, this will represent an impressive recovery from the lows hit less than a month ago. But the bulls will also want gold to hold $2,600 as support on any pullbacks.”
Gold’s latest rally began Monday as traders reacted to weekend news that the People’s Bank of China purchased 5 tonnes of gold in November, marking its first purchase in six months.
Ricardo Evangelista, Senior Analyst at ActivTrades, noted that gold continues to benefit from geopolitical uncertainty as well as expectations that the Federal Reserve will cut interest rates following next week’s monetary policy meeting.
However, Evangelista also highlighted a significant challenge for gold this week as investors focus on inflation, which remains stubbornly high.
“The US dollar gained renewed strength following last Friday’s better-than-expected non-farm payrolls data, presenting a challenge for gold prices due to the inverse correlation between the two assets,” he said. “Analysts forecast an uptick in consumer prices, which could further fuel the narrative of a dollar resurgence and weigh on gold. Conversely, lower-than-expected inflation figures could lend support to bullion prices.”
Naeem Aslam, Chief Investment Officer at Zaye Capital Markets, said hotter-than-expected inflation isn’t expected to deter the Fed from cutting rates next week; however, it could shift expectations regarding how low rates might go in 2025.
