In a significant development for the global gold market, central banks added 1,136 tonnes of gold worth approximately $70 billion to their reserves in 2022. This is the largest annual net purchase of gold ever recorded. It’s emerging economies such as China, India and Turkey who are quickly increasing their gold reserves that are fueling this surging trend. As these nations strengthen their reserves further, the price of gold has been hovering near key resistance, fluctuating around $3,335.
At the same time, the dynamics of the gold market have fundamentally changed, particularly against the backdrop of geopolitically charged markets and ongoing trade negotiations. Meanwhile, US President Donald Trump has talked up winning trade agreements with countries all over the world. He is especially interested in the case of India. So he’s hoping to announce these deals before that tariff goes into effect on July 9th. This uncertainty about the future of these tariffs and possible new tariffs could keep pushing gold prices higher in the short term.
Rising Central Bank Purchases
The record-breaking increase in gold reserves by central banks speaks to a larger narrative of diversified reserve management. In 2022, central banks worldwide bought record levels of gold – over 1,136 tonnes. This radical increase, even accounting for all the smuggling involved, reflects their increasing proclivity towards gold during economic turbulence. It is largely emerging economies — China, India and Turkey in particular — who are at the forefront of this trend, rapidly increasing their gold reserves.
China continues to de-dollarize at an alarming rate, most notably by aggressively accumulating gold. This strategy has made the country a strong contender in the global gold market. In fact, the country’s central bank has been particularly aggressive about adding to its gold reserves. This strategy serves to diversify foreign reserves, reducing their reliance on the US dollar. We applaud India, Turkey, and others for leading. They see gold’s role as the ultimate safe-haven asset in a world of volatile fiat currencies and significant geopolitical tension.
Central banks are increasing their gold purchases at a record pace. This isn’t just a reaction to today’s economic realities, though this is a strategic move to strengthen their bottom lines for years to come.
Technical Indicators and Price Movements
At the moment, prices of gold are trading just above a long-term upward-sloping trend line of an Ascending Triangle formation on the daily chart. This technical pattern indicates a very high probability bullish momentum. Should prices manage to close above the horizontal resistance level established at approximately $3,500 from the April 22 peak, we might witness explosive action. Yet, at this point in time, gold is bouncing around Thursday’s range – $3,335 – either above or below.
The 14-day RSI continues to hover in the mid-40s, implying more of a rangebound disposition for the find commodity. In other words, there is not a consistent trend up or down. Traders need to be on the watch for breakouts or breakdowns on further development.
Additionally, the cost fluctuates around the 20-day Exponential Moving Average (EMA), at present level, about $3,342. A clear drop under the upward-sloping trendline might result in a fast price drop. If the prices drop below this May 29th low at $3,245, they would likely move towards the impending important support level at $3,200.
Future Outlook and Potential Resistance Levels
The near-term outlook for gold is uncertain as traders continue to weigh conflicting market cues and geopolitical events. As we mentioned last week, we are watching for major resistance levels at $3,550 and $3,600. If prices begin to go up, these levels may prove to be decisive obstacles. Any positive movement would cause for great increases, especially if the price surpasses some key resistance levels.
In addition, all players on the market are intently tuned into US President Trump’s tweets about trade agreements. We’re told he is planning some announcements prior to the July 9 tariff deadline. Each of these announcements has the potential to move market sentiment and impact gold prices directly. How these negotiations shake out could either improve or increase confidence in overall market stability.