Key information
- China’s return to buying gold has boosted demand.
- Geopolitical tensions, particularly in Syria, have pushed investors to turn to safe havens like gold.
- Anticipation of rate cuts from major central banks around the world has fueled the upward trajectory of gold prices.
The price of gold rose to its highest level in more than two weeks, driven by a resumption of gold buying in China and increased geopolitical concerns following the recent upheaval in Syria . This upward trajectory has been fueled by anticipation of further rate cuts from major central banks around the world.
The escalation of the situation in Syria
The escalating situation in Syria, where rebel forces took control of Damascus, ending Assad’s long-standing rule, has contributed to global political and economic uncertainty. This instability, combined with ongoing conflicts in the Middle East, has pushed investors to turn to traditional safe havens like gold. A similar rise in gold prices was seen in late November during a significant escalation of the war between Ukraine and Russia.
China’s return to buying gold
China’s return to gold buying and announcement of increased economic stimulus measures also helped boost gold demand. Chinese authorities have pledged to implement a more proactive fiscal policy in 2025, with analysts anticipating further easing through rate cuts, increased deficits and greater government borrowing. Additionally, the People’s Bank of China resumed purchasing gold reserves in November, after a six-month hiatus.
Market attention shifts
Market attention is now focused on upcoming decisions by central banks around the world, who generally expect further monetary easing. The Bank of Canada is expected to cut its benchmark rate by 50 basis points later this week, while the Swiss National Bank and the European Central Bank are expected to make reductions of 25 basis points each. Lower interest rates lower the opportunity cost of holding gold, increasing its appeal as a store of value.
Analysts remain cautious
However, despite the recent recovery, some analysts remain cautious. Factors such as the strengthening US dollar and rising bond yields could pose headwinds for gold prices in the near term. Michael Brown, senior strategist at Pepperstone, suggests a “wait and see” approach, noting that Monday’s rise in gold occurred despite the sell-off in Treasury bonds across the curve. Historically, gold prices tend to move inversely to the US dollar and government bond yields.
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