In a remarkable turn of events, the price of gold experienced a sudden surge, jumping by $27 and breaking through the formidable $2,350 barrier during Asian trading on Monday. This surge propelled gold to a new all-time high of $2,354. Despite the easing of geopolitical tensions between Israel and Hamas and diminishing expectations of a June interest rate cut by the US Federal Reserve (Fed), gold prices continued their upward trajectory, largely fueled by reports of significant gold purchases by global central banks.
A Chinese official disclosed on Sunday that the People’s Bank of China (PBOC) had acquired gold for its reserves for the 17th consecutive month in March. According to the official, the amount of bullion held by the Chinese central bank increased to 72.74 million fine troy ounces last month. Market analysts anticipate robust gold purchases by central banks worldwide later this year, which has further boosted gold prices to unprecedented levels.
Data from the World Gold Council (WGC) revealed that central bank demand for gold totaled 1,037.4 metric tons in 2023, just shy of the record high set in 2022 at 1,081.9 metric tons. The latest WGC report highlighted that global central bank purchases of gold increased by 19 metric tons in February, marking the ninth consecutive month of growth.
Despite the remarkable rally in gold prices, there are lingering uncertainties about whether this upward trend will be sustained, especially in anticipation of Wednesday’s release of the Consumer Price Index (CPI) from the United States (US). Last Friday, the US economy added 303,000 jobs in March, surpassing expectations of 200,000 job additions and the previous figure of 275,000. This strong performance in US Nonfarm Payrolls has reduced the likelihood of a June interest rate cut by the Fed from approximately 62% to about 48%, according to the CME Group’s FedWatch Tool.