Gold advances above US$5,000 as dip-buyers return to choppy market

Despite a week of choppy trading since the historic reversal, banks have backed bullion to recover due to long-term demand drivers. Photo by Sakchai Lalit/AP Photo/Postmedia files

Article content

Gold climbed above US$5,000 an ounce, as dip-buyers returned to the market after an exceptionally volatile week for precious metals.

Article content

Bullion rose as much as 2.3 per cent on Monday, gaining 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. A gauge of the dollar weakened.

Article content

Article content

Article content

Gold’s ability to stabilize above the US$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.

Article content

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.

Article content

Article content

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. United States Treasury Secretary Scott Bessent cited “unruly” trading in China as a reason behind last week’s wild price swings.

Article content

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 U.S. assets, policy uncertainties and elevated central-bank buying.

Article content

Article content

Chinese regulators have advised financial institutions to rein in their holdings of U.S. Treasuries, citing concerns over concentration risks and market volatility, according to people familiar with the matter. Officials urged banks to limit purchases of U.S. government bonds and instructed those with high exposure to pare down their positions, the people said.

Article content

Article content

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 six per cent on Monday to top US$82 an ounce.

Article content

Article content

“Silver has entered a markedly higher-volatility regime,” Marc Loeffert, trader at Hereaus Precious Metals wrote in a note on Monday. Retail dip buying has driven large ETF inflows into silver, he said, helping the white metal to reverse some of its rapid losses.

Article content

Looking ahead, upcoming U.S. economic data should offer traders clues on the Fed’s policy direction. The January jobs report due Wednesday is expected to show signs of the labour market stabilizing, and inflation data is scheduled for Friday.