Gold Climbs, Silver Jumps on China Stimulus, Syria Chaos
Monday, 12/09/2024 14:51
GOLD ROSE and silver prices jumped on Monday as the US Dollar fell despite geopolitical risks intensifying from Syria to South Korea, while Beijing announced its strongest monetary stimulus since 2011 and China's central bank resumed gold purchases after a six-month break,
writes Atsuko Whitehouse at BullionVault.
China's Communist leaders today announced a shift to a "moderately loose" monetary policy for 2025, coupled with strong fiscal expansion and significant rate cuts – the first stated policy change since 2011 – as President Xi Jinping and his 24-member Politburo pledged to "stabilize property and stock markets" after multiple years of losses.
"The wording in this Politburo meeting statement is unprecedented," says Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group.
After
gold ignored last week's political turmoil in Korea, France and Romania, spot prices rose as much as 1.4% on Monday to a 2-week high of $2670 per Troy ounce, making 5.2% gains from the steep losses seen immediately after Donald Trump's Republicans – vowing to impose trade tariffs on all foreign imports, starting with Chinese goods – won a decisive victory in the US elections.
Silver, primarily an industrial metal, meanwhile surged 3.3% to a 1-month high above $32 per Troy ounce, up 7.8% during the same period.
Oil prices also rose Monday, adding more than 2.2% to Brent crude, after the Opec+ cartel of producer nations postponed plans to increase output until April, partly due to China's economic slowdown.
With New York futures contracts extending the move in precious metals, silver has now outpaced gold for 2024 to date, while US benchmark WTI remains lower since last New Year's Eve.
"The commodities sector has kicked off the week on a firm footing," says derivatives platform Saxo Bank's commodity strategist Ole Hansen, "led by gains in energy and industrial metals, as markets responded to developments in Syria, a strategic pivot in China, and incoming rate cuts in the next two weeks."
The People's Bank of China (PBOC) – the world's largest single gold buyer in 2023 – increased its gold reserves by 5 tonnes in November to 2,269 tonnes
according to official data, marking its first reported purchase since April.
"The actual tonnage is neither here nor there, given that gold spot market turnover is typically more than 70 times global mine production," says Rhona O'Connell at brokerage Stone X Group Inc.
"The significance is the psychological impact on the market."
The POBC – which has in the past
kept the changes in China's gold holdings secret, suddenly announcing huge upwards revisions in 2009 and then 2015 – increased its reported gold reserves for 18 month in a row until April this year, adding 316 tonnes as the price of gold rose almost 41% in US Dollar terms.
The central bank of China – gold's No.1 private consumer nation – has now reported gold purchases totalling 34 tonnes this year so far.
"Signs of Middle East escalation should [also] put a bid back in gold," says Nicky Shiels, head of metals strategy at Swiss refining and finance group MKS Pamp, after opposition militias led by a former al-Qaeda commander toppled Syria's 24-year ruler President Bashar al-Assad on Sunday following 13 years of civil war, forcing him to flee to Russia, which has granted him asylum.
South Korea today banned President Yoon Suk Yeol from leaving the country after narrowly surviving an impeachment vote over his failed attempt to impose martial law last week – a vote the opposition now wants to re-run – while Seoul's benchmark Kospi stock market index lost 2.3%.
Assad was
toppled by "a foreign conspiracy" claims media in Iran after Israel struck a suspected chemical weapons site in Syria over the weekend and announced a "temporary" military seizure of a demilitarized buffer zone in the Golan Heights.
Today's rally in gold prices is "a reminder how hard it is to be short gold given still elevated headline risk," says Shiels at MKS.
With China's Shanghai Composite Index slipping 0.3% Monday before China's policy announcement, hold prices on the Shanghai Gold Exchange rose 0.5% to ¥617 per gram but continued to trade at a discount to London, indicating weak demand.
The gap between onshore Yuan prices and the international benchmark of London settlement narrowed to $8 per Troy ounce, a smaller discount than last week's average of $12, but the reverse of Shanghai gold's typical historical premium.
Gold priced in Euros gained 1.4% to €2527 per Troy ounce even as the Euro edged higher from a 2-year low against the US Dollar ahead of the European Central Bank's policy decision this week.
For UK investors, gold prices in British Pounds rose 0.9% to £2090 per ounce.
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