The price of gold jumped amid inflation and events in Syria

Gold prices have rallied over the past two trading days, fueled by rising demand for inflation shelters and renewed gold purchases from China. Expectations of further interest rate cuts by major central banks also contributed to the precious metal's upward momentum. The rally (strong growth - ed.) in gold continued in the Asian session on December 11, with gold futures on the Comex exchange up 0.71% to $2,737 per troy ounce, Euronews reported.

Over the weekend, the Syrian rebel army captured the capital Damascus, ending the 50-year Assad regime. The political shift, coupled with ongoing conflicts in the Middle East, have heightened global political and economic uncertainty, spurring demand for the traditional haven asset - gold. A similar spike was seen in late November amid the serious escalation of the war between Ukraine and Russia.

On December 9, Chinese top officials pledged to adopt a "more active fiscal policy," in 2025. Analysts expect the world's second-largest economy to impose a more accommodative policy by cutting interest rates, widening the deficit and increasing government borrowing.

In addition, the People's Bank of China announced that in November it resumed buying gold reserves after a six-month hiatus.

Ray Jia, head of China research at the World Gold Council, noted that China's gold demand is expected to stabilize in 2025, supported by expected interest rate cuts and increased economic pressures amid Trump's tariff threats.

For the rest of the week, investors will be closely watching major central banks' decisions on interest rates, with widespread expectations of further monetary easing. The Bank of Canada is expected to lower its key interest rate by 50 basis points, while the Swiss National Bank and the European Central Bank are expected to make 25 basis point cuts each. Falling interest rates reduce the opportunity cost of owning gold, which supports its attractiveness as a store of value.

In the US, November inflation data due this week will play a crucial role in shaping the Federal Reserve's outlook for monetary policy. Markets expect the annual headline consumer price index (CPI) to rise to 2.7% from 2.6% in October, reinforcing expectations for another 25 basis point rate cut next week.

Despite the recent rally, bearish factors (investor expression for the possibility of a prolonged decline - ed.) remain.

Historically, gold prices move inversely to the US dollar and government bond yields. A strengthening dollar and rising bond yields put downward pressure on gold prices, while a weakening dollar and falling yields tend to support gold.

Following Trump's recent election victory, the dollar has strengthened and US Treasury yields have risen, driven by expectations that renewed tariffs will add to inflationary pressures and prompt the Federal Reserve to tighten monetary policy.

This week, the dollar and the yield on the 10-year US Treasury note have seen a further increase, representing a potential headwind for gold. A stronger-than-expected reading in the US consumer price index could add to this pressure, leading to a significant near-term decline in gold prices. | BGNES