The gold market witnessed a significant upswing on Wednesday, as the price of gold continued its upward trajectory for the third consecutive day. This movement followed a robust advance on the previous day, drawing further buying interest. The precious metal reached its highest mark since early November, trading around the $2,750 area during the Asian session, driven by global economic uncertainties and a flight to safety.
Gold's recent momentum stems from a combination of factors, including uncertainty surrounding U.S. President Donald Trump's trade policies and fluctuating U.S. Treasury bond yields. As central banks from emerging economies such as China, India, and Turkey rapidly increase their gold reserves, the commodity's appeal as a safe-haven asset continues to grow. Data from the World Gold Council reveals that central banks added 1,136 tonnes of gold worth approximately $70 billion to their reserves in 2022.
The recent overnight breakout through the $2,720 supply zone served as a fresh catalyst for bullish traders. This development underscored the bullish sentiment prevailing in the market and suggested that the path of least resistance for XAU/USD remains upward. Despite a strong U.S. Dollar, which typically suppresses gold prices, the weaker dollar has provided additional impetus for gold's ascent.
Gold's inverse relationship with the U.S. Dollar and U.S. Treasuries also plays a crucial role. As U.S. Treasury bond yields decline amid expectations of Federal Reserve interest rate cuts, gold benefits from its status as a non-yielding asset. Lower bond yields reduce the opportunity cost of holding gold, further supporting demand for the yellow metal.
The next critical support level for gold is near the $2,700-$2,690 range. A decisive breach of this support could trigger aggressive technical selling and potentially drag gold prices down to the $2,660 level. However, if gold maintains its upward momentum, it may aim to challenge its all-time peak around the $2,790 area, a milestone reached in October 2024.
Central bank activity continues to shape the gold market landscape. Their aggressive accumulation of reserves highlights gold's enduring appeal as a store of value and hedge against economic uncertainty. These actions reinforce the perception of gold as a reliable safe-haven asset in times of global economic turbulence.