Baxia Markets
June 18, 2024

Central Banks Expected to Boost Gold Reserves in 2024 Despite Gold Price Decline

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Gold prices faced downward pressure amid prevailing risk-on sentiment in global markets, which favored riskier assets over safe-havens. Despite expectations from the World Gold Council (WGC) of strong central bank demand throughout 2024, XAU/USD continued to exhibit a bearish Head-and-Shoulders pattern on its daily chart. As of Tuesday, Gold traded around $2,310, influenced by a positive market sentiment that tempered demand for the precious metal.image-png-Jun-18-2024-01-26-01-3110-PM

The WGC's survey underscored robust expectations for central bank gold purchases in the coming year, with 81% of respondents anticipating increases in reserves, marking a significant rise compared to previous periods. This reaffirms Gold's enduring role as a long-term store of value and hedge against inflation, despite current market dynamics favoring higher-risk assets.

In addition to this, US stock indexes surged to record highs, propelled by a rally in technology stocks, further diverting investor interest away from Gold. Market expectations of a potential 0.25% cut in the Fed Funds Rate by September 2024, despite the Federal Reserve's revised interest rate outlook, also exerted downward pressure on Gold, which does not yield interest.

From a technical standpoint, indicators on the daily timeframe have signaled bearish divergence, with oscillators (MACD and RSI) showing descending trends despite Gold reaching new highs. The 50-day Exponential Moving Average (EMA) is flattening, possibly converging towards the 200-day EMA if current price trends persist. Despite these challenges, Gold finds equilibrium trading within the volume profile's defined value area. The Ichimoku cloud indicates a narrowing future outlook, reflective of recent sideways trading in the market.

In conclusion, while robust central bank demand supports Gold's long-term outlook, prevailing market conditions and investor sentiment towards riskier assets continue to dictate short-term price movements downward for XAU/USD. Investors and traders alike are closely monitoring economic indicators and central bank policies for further cues on Gold's trajectory in the near term.

Key Takeaways

  1. Gold prices decline as riskier assets attract investors amid positive market sentiment.
  2. XAU/USD shows a bearish Head-and-Shoulders pattern amidst broader market optimism.
  3. Survey by World Gold Council indicates strong central bank demand for gold in 2024.
  4. Despite strong central bank interest, gold faces downward pressure from risk-on sentiment.
  5. Expectations of Fed rate cuts by September 2024 impact non-yielding gold negatively.

Key Economic Releases to Watch Today


Time (GMT) Currency Event Importance Actual Forecast Previous
07:10 AUD RBA Connolly Speech Medium      
08:00 USD Fed Cook Speech Medium      
11:30 AUD RBA Interest Rate Decision High 4.35% 4.35% 4.35%
12:30 AUD RBA Press Conference Medium      
16:00 EUR ZEW Economic Sentiment Index High 47.5 50 47.1
16:00 EUR ZEW Economic Sentiment Index Medium 51.3 47.8 47.0
16:00 EUR Inflation Rate YoY Final High 2.6% 2.6% 2.4%
16:00 EUR Core Inflation Rate YoY Final High 2.9% 2.9% 2.7%
16:00 EUR Inflation Rate MoM Final High 0.2% 0.2% 0.6%
16:00 EUR CPI Final High 126.31 126.32 126.04
19:30 USD Retail Sales MoM High   0.2% 0%
19:30 USD Retail Sales Ex Autos MoM Medium   0.2% 0.2%
19:30 USD Retail Sales YoY High   2.8% 3%


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