- Gold rose up to 1.7%, recovering half its losses since the Jan 29 peak
- Chinese central bank extended gold buying for 15 months to diversify assets
- Speculative buying fueled metals rally before gold and silver crashed last month
Bullion rose as much as 1.7% on Monday, recovering some more ground after a historic rout at the end of last month. The metal has recovered around half of the losses sustained since it plunged from an all-time high hit on Jan. 29. Silver also advanced.
Gold's ability to stabilize above the $5,000 threshold “will be critical in determining whether the market can transition from a reactive bounce to a more sustainable advance,” said Ahmad Assiri, an analyst at Pepperstone Group Ltd.
Photo Credit: Bloomberg
Data over the weekend showed that the Chinese central bank extended gold purchases for a 15th month, underscoring resilient official demand — a major component of an extended bull run that preceded the recent rout. Such purchases will continue, the official Securities Times reported, with relatively small-scale purchases helping the People's Bank of China to diversify its assets without causing price volatility.
Precious metals had been on a record-breaking ascent, driven by heightened geopolitical risks, the debasement trade and concerns about the Federal Reserve's independence. A wave of speculative buying added fuel to the run before gold and silver crashed at the end of last month. US Treasury Secretary Scott Bessent cited “unruly” trading in China as a reason behind last week's wild price swings.
Despite a week of choppy trading since the historic reversal, banks and asset managers including Deutsche Bank AG, Goldman Sachs Group Inc. and Pictet Asset Management have backed bullion to recover due to long-term demand drivers, such as the wider diversification away from US assets, policy uncertainties and elevated central-bank buying.
Chinese regulators have advised financial institutions to rein in their holdings of US Treasuries, citing concerns over concentration risks and market volatility, according to people familiar with the matter. Officials urged banks to limit purchases of US government bonds and instructed those with high exposure to pare down their positions, the people said.
For silver, market moves have been more violent than for gold, amplified by speculative momentum. The white metal — which has lost more than a third since hitting a record peak — rose as much as 6% on Monday to top $82 an ounce.
Looking ahead, traders will be looking to upcoming US economic data for clues on the Fed's policy direction. The January jobs report due Wednesday is expected to show signs of the labor market stabilizing, and inflation data is scheduled for Friday.
Adding to concerns about the Fed's independence, President Donald Trump's nominee to become the next Fed chair, Kevin Warsh, voiced support for a new accord between the US central bank and the Treasury Department.
Gold climbed 0.6% to $4,992.66 an ounce as of 11:15 a.m. in London. Silver advanced 1.9% to $79.28. Platinum and palladium fell. The Bloomberg Dollar Spot Index, a gauge of the US currency, was down 0.2%
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