Buying the Retreat in Gold Despite Chinese Investor Shift to Stocks

Gold has retreated more than $50 off the highs, but the main trend remains bullish and it is forming a bullish reversing pattern right now, so we decided to open a buy trade in XAU/USD. The decline seems complete a Gold finds support at the 100 SMA on the H1 chart, forming a doji candlestick, which points to a continuation of the uptrend.

The demand for safe-haven assets has surged, driven by central bank rate cuts and rising geopolitical tensions. This has pushed gold prices to new heights, with the current peak at $2,685, climbing nearly every day. Falling interest rates and global economic uncertainty have increased gold’s appeal, particularly as the US dollar weakened following the Federal Reserve’s 50 basis point rate cut earlier this month.

Gold Chart H1 – The 100 SMA Holding As Support

Gold’s Momentum Supported by FED Rate Cut

Moving averages are providing support during pullbacks, sustaining gold’s bullish momentum. Investors are now anticipating another 50 basis point rate cut at the upcoming FOMC meeting in November, with a 60% chance of this happening. This expectation is keeping demand for gold strong. Although gold is underperforming today with a 1% drop, down $30 to $2,628.85, this follows a significant rally, and the 200-day Simple Moving Average (SMA) is still holding as support.

Market Dynamics in China and BRICS Influence

Earlier this year, the People’s Bank of China (PBOC) was a major gold buyer. Now, retail investors in China are driving up gold volumes as they shift allocations from real estate and equities into gold. However, the recent surge in equities, fueled by China’s fiscal and monetary stimulus, could reduce demand for gold in the near term. Nonetheless, gold’s Q3 seasonality is historically strong, suggesting any dip could present a buying opportunity.

Additionally, the BRICS group, which recently expanded to include nations like Egypt, Iran, Saudi Arabia, Ethiopia, and the UAE, is exploring the idea of a gold-backed currency. Although still in the hypothetical stage, this concept has been floated by member countries and could impact gold’s long-term demand.

Gold Live Chart