Gold Battles Around $4,000 Amid Volatility and Geopolitical Tensions

The gold market remains volatile and unpredictable as it attempts to establish a bottom around the US$4,000 level. After breaking above the downtrend line in May, gold rallied to US$4,165 before giving back most of its gains due to rising tensions surrounding the Iran conflict and increasing oil prices.

The underlying fundamentals continue to support the view that January's record high did not mark the end of the secular bull market. Central banks around the world have been purchasing an average of 1,000 tonnes of gold annually over the past four years, roughly double the pace seen during the previous decade.

Reserve managers expect to increase their gold holdings over the next twelve months, according to a survey by the World Gold Council. This trend reflects a long-term strategy of diversifying away from the U.S. dollar as the sole anchor of the global monetary system.