Gold Rises as PBOC Resumes Buying, Syria Boosts Safe-Haven Demand
Gold rose after China’s central bank added bullion to its reserves for the first time in seven months, as the rapid collapse of the Syrian government further rattled the Middle East.
Bullion rose as much as 0.7% to trade near $2,650 an ounce, after the People’s Bank of China said Saturday it bought 160,000 troy ounces of gold last month. The addition was the first since April, ending an 18-month buying spree that had helped prop up prices.
The resumption of purchases suggests the PBOC is still looking to diversify its reserves and guard against currency depreciation, even with bullion near its highest levels on record. However, the volume it bought — about five tons — was relatively small compared with monthly additions earlier this year. “The market reaction has been a bit muted because even though the PBOC has indicated it will stop activity in May, the market has seen it as very temporary, and that demand has been absorbed last month,” said Nicholas Frappell, global head of institutional markets at ABC Refinery in Sydney. “The buying has not been particularly supportive, and there’s been a lot of other news — including the fall of the Assad regime.” Traders were monitoring developments in Syria over the weekend, after President Bashar al-Assad fled as rebel forces seized the capital Damascus.
U.S. airstrikes hit dozens of Islamic State targets in the center of the country on Sunday as President Joe Biden warned that the fall of Assad could lead to a resurgence of Islamic extremism. Gold surged to an all-time high above $2,790 an ounce in October, supported by the Federal Reserve’s pivot to monetary easing, as well as rising safe-haven demand on rising tensions in the Middle East and Ukraine. Prices have eased since then as the dollar strengthened following Donald Trump’s victory in the U.S. election, but they remain 28% higher this year.
Spot gold rose 0.4% to $2,643.50 an ounce as of 10:49 a.m. in Singapore, following a 0.4% decline last week. The Bloomberg Dollar Spot Index rose 0.1%. Silver, platinum and palladium all rose.
Looking ahead, the market is focused on U.S. consumer and producer price reports due later this week, which are expected to show a slight increase in inflationary pressures. The figures are among the last key indicators before next week’s Fed meeting — its last policy decision before Donald Trump takes office in January. Treasury yields have fallen as traders have increased bets on another rate cut — a scenario that tends to benefit gold since it doesn’t pay interest.
Source: Bloomberg
