(Bloomberg) — Gold rose after China’s central bank added bullion to its reserves for the first time in seven months, and the rapid fall of the Syrian government further destabilized the Middle East.
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Bullion climbed as much as 0.7% to trade near $2,650 an ounce, after the People’s Bank of China said Saturday it bought 160,000 fine troy ounces last month. The addition was the first since April, which was the end of an 18-month run of purchases that had helped underpin prices.
The resumption in purchases 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 to monthly additions earlier this year.
“The market reaction is somewhat muted because although the PBOC had indicated it was pausing activity in May, the market took it as very temporary, and that demand has been absorbed last month,” said Nicholas Frappell, global head of institutional markets at ABC Refinery in Sydney. “The purchase isn’t super supportive, and there has been a lot of other news, — including the fall of the Assad regime.”
Traders were monitoring developments in Syria at the weekend, 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.
Gold soared to an all-time high above $2,790 an ounce in October, supported by the Federal Reserve’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 as the dollar rallied following Donald Trump’s US election win, but they remain 28% higher this year.
Spot gold rose 0.4% to $2,643.50 an ounce as of 10:49 a.m. in Singapore, following a 0.4% decline last week. The Bloomberg Dollar Spot Index added 0.1%. Silver, platinum and palladium all climbed.
Looking ahead, 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 Fed’s meeting next week — its final policy decision before Donald Trump takes office in January. Treasury yields have drifted down as traders have boosted wagers on another rate cut — a scenario that tends to benefit gold as it does not pay interest.