Gold falls after report shows decline in Chinese jewelry buying

• Gold weakens after the China Gold Association highlights a drop in the consumption of Gold for jewelry. 
• The rising price of Gold is posited as the main reason behind the reduction in demand. 
• XAU/USD remains within the confines of a mini range, consolidating within an overall bullish trend.  

Gold (XAU/USD) falls over half a percent to trade in the $2,730s on Monday but remains within the confines of the previous week's mini range. The precious metal loses ground on reports that demand from China, its largest market, is softening. 

The precious metal, however, remains underpinned by safe-haven flows due to the ongoing conflict in the Middle East, which intensified over the weekend with Israel's bombing of Iran, although the effect was offset by the decision only to target military installations and crucially not Oil and nuclear facilities. 

Gold gains a further boost from increasing uncertainty over the outcome of the US presidential election and the overall downtrend in interest rates globally, which, given it is non-interest paying, enhances the yellow metal's attractiveness to investors vis-a-vis other assets. 

Gold drops after report shows softening Chinese demand 

Gold edges lower on Monday after data released by the China Gold Association (CGA) showed a fall in demand from the world's largest Gold consumer in the first three quarters of 2024, compared to the same period a year ago. 

Total consumption was 742 tons between January and September, which is 11.18% lower than the same period last year.

Consumption of Gold jewelry in China fell by 27.53%, to 400 tons when compared to the same period in 2023, the CGA reported. 

Demand for Gold bars and coins, however, increased 27.14%, to 283 tons compared to 2023. Gold used in industrial processes, meanwhile, reached 59 tons, a decrease of 2.78%.

The high price of Gold was given as the main reason for the fall in demand, "In the first three quarters, the price of Gold continued to rise, and the consumption of Gold jewelry was significantly affected," the report says. 

Trading on the Shanghai Gold Exchange, however, increased by 47.49% to 46,500 tons (23,200 tons on one side), due to traders participating in the rally. Interest in ETFs also increased.

"The domestic Gold ETF holdings rose to 91.39 tons, an increase of 29.93 tons from the end of 2023, an increase of 48.69%," added the report. 

Technical Analysis: Gold continues in a sideways band

Gold trades in a mini range between $2,708 and $2,758 after peaking at the latter level and rolling over.

That said, the yellow metal is in a steady uptrend on all time frames (short, medium and long), which, given the technical principle that "the trend is your friend," the odds favor more upside. 

XAU/USD 4-hour Chart

A break above the top of the range at $2,758 would help confirm a continuation up to the next big-figure target level, which lies at $3,000 (round number and psychological level).