By Abdelaziz Albogdady, Market Research & Fintech Strategy Manager at FXEM
Gold extended its rally on Monday, climbing near its highest point last week. The metal’s price levels stabilized to a certain extent after a significant correction, but the market could remain exposed to volatility.
Structural support for the metal remains firm. Central bank demand continues to play a critical role, with China’s central bank extending its gold purchases for a fifteenth consecutive month in January. This persistent accumulation, alongside steady inflows into gold-backed ETFs, paints a bullish medium to long-term scenario for the precious metal.
Geopolitical risks continue to provide an additional layer of support. Tensions between Russia and Ukraine remain elevated despite ongoing diplomatic efforts, sustaining a baseline level of risk. However, in the Middle East, some near-term relief emerged after US-Iran talks, easing immediate fears of military escalation.
Additionally, the decisive victory for Prime Minister Sanae Takaichi in Japan strengthened expectations of looser fiscal policy, potentially reinforcing demand for gold over time.
Despite the strong long-term support, short-term risks remain from a technical perspective. Gold could face another downward leg before a more durable advance materializes. As a result, vigilance and a strict profit protection strategy remain important for short-term traders.
Looking ahead, investor attention now turns to key US data, including January employment figures and inflation readings later this week. These releases could shape expectations for the Federal Reserve’s interest rate path and impact gold’s trajectory.