By Dr. Renisha Chainani, Head- Research, Augmont – Gold for all
US Employment Report – The precious metal declined last week as the labour market report revealed that the economy added 227K new jobs, an overestimate of 200K. As expected, unemployment rate increased to 4.2%. The CME Fed Watch tool indicates that the probability of the Fed cutting interest rates by 25 basis points to 4.25%-4.50% this month has increased from 71% on December 5 to 87% now.
Iran – Israel War – Israel and Hezbollah’s ceasefire deal in the Middle East seems to be in jeopardy as tensions have flared up again and both sides accuse the other of breaking the conditions of the truce. Hezbollah attacked the Israeli military base near Lebanon with two rockets, and the Israeli army responded with a series of airstrikes last week.
Russia – Ukraine war – The conflict between Russia and Ukraine, meantime, also keeps the general risk appetite alert. Sergey Lavrov, the Russian foreign minister, issued a warning, saying that Russia is prepared to stop the West from accomplishing its objective of delivering a “strategic defeat” to the nation.
Syria Civil War – After 50 years of a cruel regime, Syrian President Bashar al-Assad and his family escaped to Moscow on Sunday and were granted political asylum. Iran’s envoy to Syria, Turkey, and other regional nations may engage in combat if Bashar al-Assad’s regime is overthrown. Increased global unpredictability and geopolitical tensions make safe-haven investments like gold more appealing.
ETF Flows – Global gold investors have decreased their exposure to the precious metal as a result of Donald Trump’s election victory and emphasis on his protectionism policies, which advocate for a stronger U.S. economy and dollar. According to the WGC’s monthly ETF flows report, there was a notable amount of liquidation in the global gold market in November, with 28.6 tonnes of gold valued at $2.1 billion leaving the ETF market.
Central Bank Buying– In November, the People’s Bank of China resumed buying gold for its reserves after a six-month pause. China is a significant consumer of gold; thus, this could raise the price of precious metals. By the end of November, China’s gold reserves had increased from 72.80 million troy ounces to 72.96 million troy ounces.
Additionally, sentiment remains positive in India as RBI increased its gold holdings by 27 tonnes in October, bringing its total holdings to 77 tonnes so far this year. India’s net buying activity for the year to date has increased fivefold compared to 2023. RBI is the world’s largest buyer of gold in 2024, following that are the countries Turkey and Poland.
In my opinion, the expectation of lower interest rates, ongoing elevated geopolitical risk, and uncertainty around the implementation of protectionism policies under the Trump administration are the main reasons why demand will get supported and find a floor for gold prices around $2500 (~Rs 73000) in the coming months.
For December month, support is $2600 (~Rs 74500) and resistance is $2720 (~Rs 77500). Prices are expected to consolidate in this range in this month.
Gold Daily Chart
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