Gold’s recent surge above US$2,400 per ounce has ignited discussions regarding its driving forces. Ross Norman, founder of MetalsDaily.com, sheds light on China’s pivotal role in propelling the precious metal to unprecedented highs and contemplates its future trajectory.
Norman attributes the initial ascent, reaching levels around US$2,050 to US$2,100, to substantial purchases by central banks. These acquisitions, characterized by their high quality, signify a long-term investment strategy, less susceptible to market fluctuations. He underscores the significant support from Chinese buyers, both retail and institutional, including a burgeoning interest among younger demographics, akin to a “Costco moment” for gold.
However, Norman discerns a notable shift in dynamics around March 1, as gold’s trajectory transformed dramatically. Identifying a prominent player in the market, he underscores China’s amplified influence, surpassing expectations. He identifies speculative fervor on the Shanghai Futures Exchange (SHFE) as a driving force behind the surge to an all-time high of US$2,430 per ounce.
Yet, regulatory interventions by exchanges, including the SHFE and COMEX, dampened the enthusiasm by raising initial margins, effectively curbing speculative trading. Consequently, Chinese interest waned, leading to a retracement in gold prices.
Norman underscores a nuanced perspective on recent price movements, delineating between the foundation of quality buying and the speculative frenzy that ensued, particularly in futures markets. While acknowledging the resilience of gold’s value, he cautions against the vulnerability inherent in speculative trading.
In essence, Norman’s analysis underscores the multifaceted nature of gold’s recent price trajectory, with China’s influence looming large yet tempered by regulatory interventions, leaving the future of gold prices uncertain.