Why is Gold Rallying?
Gold prices have surged recently due to a combination of factors driven primarily by market dynamics in China and global economic conditions. Chinese demand for gold has remained high throughout the year, with the Shanghai Gold Exchange seeing its daily trading volume nearly double in April. Gold in China is trading at a premium compared to international prices, reflecting robust domestic demand. Additionally, speculation about potential Federal Reserve rate cuts, spurred by recent US inflation and retail sales data, has increased gold’s attractiveness. Lower interest rates generally make gold more appealing as it doesn’t yield interest, enhancing its allure over bonds.
Renewed geopolitical tensions in the Middle East have also driven investors towards gold as a safe-haven asset. Central banks, particularly in China, are aggressively buying gold, with the People’s Bank of China purchasing gold for 18 consecutive months. Furthermore, China has been diversifying its foreign reserves by selling US Treasury bonds, reducing its reliance on US dollar-denominated assets. European central banks, such as the Bank of England and Sweden’s central bank, have also hinted at possible interest rate cuts, which typically support higher gold prices. Despite outflows from gold ETFs, physical demand remains strong, driving prices to new highs.
Trade Idea!
With Gold’s technical and fundamental outlook aligned, we can see further buying opportunities, we are utilising the 15-minute timeframe and to simplify our entries we are using Cluster 2.0 to point out good pullbacks to join the rally, targeting 2:1 reward to risk trades or targeting previous highs where possible. This allows us to focus on other charts and get notified when a setup occurs.
