Gold price clings to gains ahead of US ISM Manufacturing PMI

Gold prices (XAU/USD) edges higher in Friday's European session ahead of the United States (US) ISM Manufacturing Purchasing Managers' Index (PMI) data for December, which will be published at 15:00 GMT. The Manufacturing PMI is seen steady at 48.4, suggesting that activities contracted at a steady pace.

The precious metal has a stellar performance in 2024 with gains exceeding 27%, the metal’s best annual return since 2010. This sustained rally is attributed to strong safe-haven demand amid persistent geopolitical tensions in the Middle East and the prolonged Russia-Ukraine conflict.

According to three sources cited by Axios, US President Joe Biden reportedly discussed contingency plans to strike Iran’s nuclear facilities if Tehran made significant progress toward developing a nuclear bomb before Donald Trump’s inauguration on January 20. These discussions highlight heightened concerns over Iran’s nuclear ambitions during the transitional period between administrations.

A Financial Times report noted that the People's Bank of China (PBoC) anticipates an interest rate cut this year at an appropriate time. Traders are closely monitoring the potential recovery in China’s economy and its effect on Gold demand. President Xi Jinping reaffirmed his commitment on Tuesday to prioritizing economic growth, promising more proactive policies to bolster China's economy in 2025.

The National Development and Reform Commission (NDRC), China's state planner, expressed confidence in achieving continued economic recovery in 2025. In a statement on Friday, it highlighted plans to significantly increase funding from ultra-long treasury bonds to support "two new" programs, with expectations for steady consumption growth throughout the year.

Daily Digest Market Movers: Gold price holds onto gains as US bond yields decline

• The US Dollar Index (DXY), which measures the US Dollar’s (USD) performance against six major currencies, climbed to a fresh multi-year high of 109.56 on Thursday before easing slightly to trade around 109.20 at the moment of writing. The strength of the Greenback may have limited the upside potential of dollar-denominated Gold, as a stronger USD makes Gold more expensive for buyers using other currencies.
• Gold, a non-yielding asset, may have found support as yields on 2-year and 10-year US Treasury bonds remained subdued at 4.24% and 4.56%, respectively. Lower bond yields reduce the opportunity cost of holding Gold, making it more attractive to investors.
• The non-yielding Gold could face challenges as the Federal Reserve (Fed) signals a more cautious stance on rate cuts for 2025, suggesting a shift toward tighter monetary policy. This hawkish approach is shaped by uncertainties surrounding the potential economic policies of the incoming Trump administration.
• Record central bank purchases have bolstered the demand for the yellow metal. A World Gold Council survey suggests that major central banks will likely increase Gold purchases in 2025, further boosting demand for the precious metal.
• While China's manufacturing activity showed minimal growth in December, services and construction sectors have recovered. The data indicates that policy stimulus is beginning to impact certain sectors, as China prepares for new trade risks stemming from tariffs proposed by US President-elect Donald Trump.
• Reuters cited that Russia launched a drone strike on Ukraine's capital, Kyiv, on New Year's Day early Wednesday, resulting in two deaths, at least six injuries, and damage to buildings in two districts. Explosions echoed across the morning sky as Ukraine's air force issued warnings of incoming drones.
• Meanwhile, the Israeli military maintained pressure on northern Gaza, and carried out strikes in a suburb of Gaza City on Wednesday, according to medics. Airstrikes in Shejaia, a suburb of Gaza City, killed at least eight Palestinians. The Israeli military has not yet commented, and the identities of those killed in the attack remain unclear.

Gold price climbs above nine-day EMA

Gold price trades near $2,660.00 per troy ounce on Friday, with the daily chart signaling an emergence of a bullish bias. The metal price has climbed above the nine- and 14-day Exponential Moving Averages (EMAs), indicating a strengthening bullish momentum in the short term. Moreover, the 14-day Relative Strength Index (RSI) has risen above the 50 level, further supporting the development of a bullish bias.

On the upside, the XAU/USD pair may explore the area around the psychological resistance of $2,700.00, followed by the next barrier at its monthly high of $2,726.34, reached on December 12.

The XAU/USD pair may test initial support around the nine- and 14-day EMAs at $2,635.00 and $2,633.00, respectively. Further support appears around its monthly low of $2,583.39, recorded on December 19.

XAU/USD: Daily Chart