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Gold Smashes Record Highs Again

An employee places ingots of 99.99 percent pure gold in a workroom at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File Photo
An employee places ingots of 99.99 percent pure gold in a workroom at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File Photo
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Gold Smashes Record Highs Again

An employee places ingots of 99.99 percent pure gold in a workroom at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File Photo
An employee places ingots of 99.99 percent pure gold in a workroom at the Novosibirsk precious metals refining and manufacturing plant in the Siberian city of Novosibirsk, Russia, September 15, 2023. REUTERS/Alexander Manzyuk/File Photo

Gold prices extended a record run on Wednesday as concerns of inflationary pressures boosted demand for bullion as a hedge, with traders shrugging off doubts over an imminent US interest rate cut and rising Treasury yields.
Spot gold was up 0.2% at $2,283.76 per ounce, as of 0602 GMT, and hit a record high of $2,288.09 earlier in the session. Bullion has hit record highs consecutively since Thursday.
US gold futures gained 1% to $2,304.20.
"Gold continues to receive safe-haven flows as Ukraine continues to attack Russia's oil infrastructure, to the point it is ignoring rising US yields and the prospects of the Fed not cutting rates in June," City Index senior analyst Matt Simpson said.
Federal Reserve policymakers on Tuesday said they think it would be "reasonable" to cut US rates three times this year, even as stronger recent economic data has sown investor doubts about that outcome.
Data this week showed US manufacturing unexpectedly rebounded, with the rise in raw materials prices triggering fears that inflation could resurge.
"With commodity prices rising in general, it brings the risks of another round of inflation - so perhaps investors are hedging for inflation," Reuters quoted Simpson as saying.
Gold, which is used a hedge against inflation and a safe haven during times of political and economic uncertainty, has gained more than 10.8% so far this year and is set for a seventh consecutive daily rise.
"Right now, gold is sensing that inflation is more of a driving variable than the interest rates and part of the momentum is also driven by speculators, hedge funds and commodity funds that start buying gold whenever their quantitative systems give them signals," Marex analyst Edward Meir said.
Elsewhere, spot silver rose 1% to $26.36 per ounce, platinum gained 0.9% to $926.80 and palladium was up 0.8% at $1.011.62.
Gold's searing rally is doing nothing to reignite enthusiasm for platinum jewelry in Asia, analysts said.

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China Flags More Policy Measures to Bolster Yuan

People shop around for prosperity decorations for the upcoming Chinese Lunar New Year, at a New Year Bazaar in Beijing, Monday, Jan. 13, 2025. (AP)
People shop around for prosperity decorations for the upcoming Chinese Lunar New Year, at a New Year Bazaar in Beijing, Monday, Jan. 13, 2025. (AP)
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China Flags More Policy Measures to Bolster Yuan

People shop around for prosperity decorations for the upcoming Chinese Lunar New Year, at a New Year Bazaar in Beijing, Monday, Jan. 13, 2025. (AP)
People shop around for prosperity decorations for the upcoming Chinese Lunar New Year, at a New Year Bazaar in Beijing, Monday, Jan. 13, 2025. (AP)

China announced more tools to support its weak currency on Monday, unveiling plans to park more dollars in Hong Kong to bolster the yuan and to improve capital flows by allowing companies to borrow more overseas.

A dominant dollar, sliding Chinese bond yields and the threat of higher trade barriers when Donald Trump begins his US presidency next week have left the yuan wallowing around 16-month lows, spurring the central bank into action.

The People's Bank of China (PBOC) has tried other means to arrest the sliding yuan since late last year, including warnings against speculative moves and efforts to shore up yields.

On Monday, authorities warned again against speculating against the yuan. The PBOC raised the limits for offshore borrowings by companies, ostensibly to allow more foreign exchange to flow in.

PBOC Governor Pan Gongsheng meanwhile told the Asia Financial Forum in Hong Kong that the central bank will substantially increase the proportion of China's foreign exchange reserves in Hong Kong, without providing details.

China's foreign reserves stood at around $3.2 trillion at the end of December. Not much is known about where the reserves are invested.

"Today's comments from the PBOC indicate that currency stability remains an important priority for the central bank, despite the market often discussing the possibility of intentional devaluation to offset tariffs," said Lynn Song, chief economist for Greater China at ING.

"Increasing China's foreign reserves will give more ammunition to defend the currency if the market situation eventually necessitates it."

China's onshore yuan traded at 7.3318 per dollar as of 0450 GMT on Monday, not far from a 16-month low of 7.3328 hit on Friday.

It has lost more than 3% to the dollar since the US election in early November, on worries that Trump's threats of fresh trade tariffs will heap more pressure on the struggling Chinese economy.

The central bank has been setting its official midpoint guidance on the firmer side of market projections since mid-November, which analysts say is a sign of unease over the yuan's decline.

Monday's announcements underscore the PBOC's challenges and its juggling act as it seeks to revive economic growth by keeping cash conditions easy, while also trying to douse a runaway bond rally and simultaneously stabilize the currency amid political and economic uncertainty.

It has in recent days unveiled other measures. In efforts to prevent yields from falling too much and to control circulation of yuan offshore, it said it is suspending treasury bond purchases but plans to issue huge amounts of bills in Hong Kong.

Gary Ng, senior economist at Natixis, said while China's onshore market has a much better pool of yuan deposits, Hong Kong plays a "significant role with higher turnover driven by FX swaps and spot transactions."

"This means that Hong Kong can be a venue for supporting the yuan through trading activities and potential investments."

Data on Monday showed China's exports gained momentum in December, with imports also showing recovery, although the export spike at the year-end was in part fueled by factories rushing inventory overseas as they braced for increased trade risks under a Trump presidency.