Gold achieves its price recovery.. What is the motive behind its remarkable rise?

Gold prices recorded a noticeable increase during the recent trading sessions, supported by the rise in demand for the yellow metal after the People’s Bank of China (the central bank) announced a return to buying gold to maximize its reserves, amid the market’s anticipation of the release of US inflation data, which may significantly affect the trends of the financial markets, according to what It was reported by the American platforms FX Empire and FX Street.

Performance of gold contracts

Gold futures witnessed a strong rise of 1.06%, equivalent to about $29 per ounce, to trade at $2,715 per ounce. At the same time, spot gold contracts rose by 1.06%, equivalent to about $28 per ounce, bringing the price of an ounce to $2,688.

Height factors

Gold prices rose due to several main factors, most notably the People’s Bank of China’s announcement of the resumption of gold purchases for its reserves after a six-month hiatus.
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According to official data, the Chinese Central Bank, which was the largest official buyer of gold in the world in 2023, returned to the market last November.
This move reflects China’s strategy to diversify its monetary reserves away from the dollar, which is a long-term goal linked to global economic transformations.
Although China did not explain why it stopped buying gold last May, it is believed that the rise in prices to record levels exceeding $2,400 was an influential factor.
But the decision to resume purchases at prices above $2,600 reflects a shift in views among Chinese decision-makers.

Gold and inflation index

In addition, the market’s attention is focused on the upcoming US CPI data, which will play a crucial role in determining expectations regarding the Federal Reserve’s monetary policy.
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A higher-than-expected index reading may strengthen the US dollar, putting pressure on gold prices, while a lower-than-expected reading may support continued gains for the precious metal.

Gold is chasing the price of $3,000,000

Gold reached its highest level ever in October 2024 and many analysts believe that the precious metal could reach $3,000 per ounce by the end of 2025, Money magazine reported.
Gold has fallen since hitting an all-time high but the yellow metal is widely expected to set new records next year.

Low interest and gold prices

There are several factors that determine gold price volatility but few are as important as interest rates.
These rates determine the cost of borrowing money and play a major role in inflation and its direct impact on gold prices as higher interest rates may lower inflation and may even lead to deflation if these high rates remain unchecked.
The Fed’s interest rate hikes in 2022 kept the price of gold steady throughout the year while technology stocks suffered significant losses.
However, the Fed has since begun to reverse course and has cut interest rates twice so far in 2024 in response to declining inflation, with further cuts expected at its December meeting.
The Fed is widely expected to continue cutting interest rates through 2025 although analysts have different opinions on how significant future interest rate cuts will be.

Why is the demand for gold increasing?

Each cut in interest rates makes it easier to borrow money and can increase inflation in the process, leading to higher inflation and thus higher gold prices. Gold benefits from inflation because fiat currencies – the currency you need to buy gold – lose their purchasing power when inflation rises.
Geopolitical tensions could also support gold prices higher. Gold typically performs well during periods of geopolitical uncertainty and gold retains its intrinsic value during these times and becomes more valuable compared to fiat currencies.
Tariffs could also generate more gains for gold investors.
These factors help explain why investors are optimistic about gold and why analysts believe that the precious metal’s current bull market will continue until 2025.