Continuous-contract gold futures rose by 1.3 per cent on Wednesday, reaching as high as US$2,312.50 per troy ounce, setting a new all-time high. This is its seventh consecutive day of gains.
Over the past five days, gold has climbed by 4.3 per cent, defying declines in both stock and bond markets, where indices like the Dow Jones Industrial Average and the S&P500 have retreated from their recent peaks.
The precious metal has surged by 11.5 per cent since the beginning of the year.
This is despite seemingly contradictory catalysts. While the expectation of a Fed interest rate cut has historically favoured gold, this week’s rise has occurred alongside signs of inflationary pressures, which typically suppress rate-cut expectations and cause stock market declines.
Traders appear to view gold as an inflation hedge amid these uncertain market conditions.
The lower dollar may have contributed to yesterday’s move, but gold has rallied even on days when the dollar strengthened. This suggests that other factors, such as strong buying appetite from certain sovereigns diversifying their dollar holdings, are at play. Central bank purchases, particularly by the People’s Bank of China, and increased buying from Chinese retail investors may also have played significant roles.
Chinese demand for gold has been notable, with retail investors turning to the precious metal amidst uncertainties in China’s property and stock markets. This shift in investment behaviour has led to increased household savings flowing into gold as an alternative asset.