Gold futures experienced a notable rally on Monday after the People’s Bank of China (PBOC) resumed its gold purchases in November, marking its first buy since April. The central bank added 160,000 fine troy ounces to its reserves, ending a six-month hiatus and signaling potential support for Chinese investor demand.
China’s resumption of gold buying comes after a significant 18-month streak of purchases, which had contributed to the price surge of gold earlier in the year. In 2023, China was the largest official sector buyer of gold, and its continuous bullion buying was a key factor in gold’s record-breaking rally.
“The market is growing optimistic that other central banks may follow China’s lead, potentially driving prices back to record levels,” said Bart Melek, head of commodity strategies at TD Securities.
In addition to the renewed gold purchases, China has expressed plans to take a more proactive approach in stimulating its sluggish economy, a move that could bolster demand for commodities, as the country remains the world’s largest consumer of raw materials.
Gold prices also gained momentum on expectations that the U.S. Federal Reserve may cut interest rates in December. Traders are now pricing in an 87% chance of a 25-basis-point rate cut at the Fed’s upcoming meeting, a sharp increase from 62% the previous week.
Investors are closely awaiting Wednesday’s U.S. Consumer Price Index (CPI) report for further signals on the Fed’s approach to monetary policy easing.
December gold futures (XAUUSD) closed up 1% at $2,664.90 per ounce, its highest settlement since November 22. Similarly, December silver futures (XAGUSD) rose 3.3%, ending at $32.216 per ounce, the highest since November 5.
Gold also received a boost from heightened safe-haven demand after escalating geopolitical tensions. Syrian rebels seized Damascus and ousted former President Bashar al-Assad, who fled to Russia. Meanwhile, Israel’s military advanced into the demilitarized zone along its border with Syria over the weekend.
A weaker U.S. dollar further amplified gold’s appeal as a safe-haven asset.
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