The World Gold Council’s latest annual survey reveals a notable sentiment shift among central banks, with a substantial 29% expecting to increase their gold reserves. This figure marks a peak since the survey’s inception in 2018, despite prevailing high gold prices. Moreover, a significant 81% of respondents anticipate global central bank gold holdings to rise over the coming year, underscoring resilience against the backdrop of current price levels.
Meanwhile, in the financial markets, the Federal Reserve’s forward guidance suggests a potential rate cut later this year, possibly as early as Q4, contingent upon future economic data. Such prospects have tempered urgency in the gold market, where recent declines may find respite should economic indicators falter sooner than anticipated, thus bolstering gold prices once more.
Gold, a non-yielding asset, tends to attract investors during periods of declining interest rates, as reduced opportunity costs enhance its appeal.
Gold Price Movement: Short-term Recovery Amidst Long-term Concerns
Following a low marked by the Non-Farm Payroll (NFP) report earlier this month, gold prices have shown signs of recovery. However, overarching bearish trends persist, characterized by a downward trajectory since reaching an all-time high of $2,450. Negative divergence patterns observed during this decline suggest potential for further downside.
Recent price action has been volatile, with attempts to breach $2,320 showing tepid momentum, especially as indicated by a narrowing trading pattern. Should the 50-day moving average act as a barrier, gold is likely to adhere to its medium-term downtrend, extending its decline.
Market sentiment around gold has been tempered by subdued geopolitical tensions and unremarkable US economic data, which has failed to support expectations for imminent rate cuts. Notably, technical analysts are eyeing critical support levels around $2,287, with potential implications for further price erosion.
In summary, while recent movements show brief upward corrections, broader market indicators and central bank sentiments signal a cautious outlook for gold prices in the near term.
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