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$2000 Gold Price 'Bullish' on Central-Bank Buying, Slower Inflation, Geopolitics

The DOLLAR gold price held onto the $2000 level in London trade Wednesday after reaching it for the first time in 3 weeks as the release of meeting minutes from the Federal Reserve's "no change" decision at the start of November boosted bets that US central bank is done raising rates and will start cutting in the first half of 2024.
The UK gold price in Pounds per Troy ounce again tried but failed to retake the £1600 level ahead of the ailing Conservative Government's latest public spending and tax plans, while the Euro price of gold edged up to 2-week highs at €1838 after the European Central Bank warned that while "history suggests a soft landing is difficult...not impossible," the 20-nation currency union's "weak economy heightens stability risks" from the past 18 months' interest-rate hikes.
Gold's "key [moving] averages [are] increasingly supportive," says a technical analysis of the Dollar-price charts from bullion-market specialist Rhona O'Connell at brokerage StoneX, with the 10-day average now above the 20-day and the current spot price rising above them both.
"Short-term momentum indicators [such as gold's moving averages] have turned positive," agrees strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp.
But while the Dollar gold price "remains in a short-term uptrend channel...still $2000/oz [looks] toppy without support from [investors in] the West and/or worsening data/geopolitics in taking prices higher."
Chart of the gold price in US Dollars per Troy ounce and kilo. Source: BullionVault
For the Dollar gold price, "The macroeconomic backdrop is turning supportive," says a note from Australasian bank ANZ, "as moderating inflation in the US raises prospects for the end of the US interest-rate hiking cycle.
"The decline in US yields and the US Dollar are increasing the investment appeal for gold."
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"Falling inflation might not dent gold’s rally," agrees Rebecca Patterson, a former chief investment strategist at Bridgewater Associates – the world's largest hedge fund with $97 billion of assets under management, despite a nearly 1/4 year-on-year drop – writing in the Financial Times.
"The precious metal can gain even if the US economy heads to a soft landing," Patterson says, pointing to continued strength in central-bank gold buying plus strong gold demand from China's household savers and investors, as well as geopolitical uncertainty around 2024's "critical" elections in the US, Taiwan and Mexico.
"For those who hold the faith that gold has the ability to preview future geopolitical and/or economic instability," says Shiels at MKS Pamp, Tuesday's steep price action "in the face of simply not much new news is vindication."
Jumping $40 per ounce "in a straight line" from Monday's lows, the gold price just "[found] the path of least resistance higher into a holiday period (Thanksgiving) and Dec Comex option expiry (next Monday).
"There just no plausible macro development, new headline or explanation but a series of constructive developments" including an inflow of investment cash into gold-backed ETF trust funds, requiring more bullion to back their shares in issue, plus news of yet more central-bank gold buying (this time from Qatar) and "strong buying demand out of Asia with India importing significantly more gold in October" ahead of the key Diwali festival and holidays.
By itself, Shiels adds, the latest central-bank gold buying data is "not bullish news, but confirmation of central-bank purchases = higher floors regime" for the underlying gold price.
Reviewing yesterday's Fed minutes meantime, "Cautious banks protecting their balance sheets...knocks on into reduced lending and thus into lower industrial investment," says O'Connell at StoneX, "or [even] a potential fresh fissure in the banking sector" repeating the spring's 'mini-crisis' in US regional banks, led by the failure of Silicon Valley Bank.
"The latter would be good for gold, and the potential instability of the former could well do likewise."
Last month's further rise in the price of existing US homes saw sales "slump to more than 13-year low" said new data Tuesday.
While Fed meeting participants didn't show any signs of wanting to cut interest rates according to the November minutes released yesterday, the interest-rate market today continued to put the odds of a rate cut in May at 60%, with a cut by end-June priced above 4-in-5.

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver and platinum market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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