Gold jumps after China resumes purchases

Gold prices surged by up to 1% after China's central bank added gold to its reserves for the first time in seven months, while the collapse of Syria’s ruling dynasty contributed to further instability in the Middle East.

Bullion climbed as much as 1%, after the People’s Bank of China said Saturday it bought 160,000 fine troy ounces last month. That was the first addition since April, which was the end of an 18-month run of purchases that had helped underpin prices, News.Az reports, citing Bloomberg.

The resumption of buying shows the PBOC is still keen to diversify its reserves and guard against currency depreciation, even with bullion near record high levels. Still, the volume it bought — about five tons — was relatively small compared with monthly additions earlier this year.

Market watchers also tend to be skeptical about the accuracy of declared Chinese central bank gold purchases.

Traders were also monitoring developments in Syria, after President Bashar al-Assad fled as rebel troops captured the capital Damascus. US airstrikes hit dozens of Islamic State targets in the central part of the country on Sunday as President Joe Biden cautioned that Assad’s downfall could lead to a resurgence of Islamic extremism.

Markets are focusing on the US consumer and producer-price reports due later this week, which are expected to show little increase in inflation pressures. The figures are among the last key indicators before the Federal Reserve’s meeting next week — its final policy decision before Donald Trump takes office in January. Treasury yields have drifted down as traders boosted wagers on another rate cut — a scenario that tends to benefit gold as it does not pay interest.

Gold soared to an all-time high above $2,790 an ounce in October, supported by the Fed’s pivot to monetary easing, as well as increasing haven demand on heightened tensions in the Middle East and Ukraine. Prices have eased since then, but remain 29% higher this year.

Spot gold rose 0.9% to $2,656.72 an ounce as of 12:19 p.m. in London, following a 0.4% decline last week. The Bloomberg Dollar Spot Index was steady, while silver, platinum and palladium all posted strong gains.

News.Az