(Bloomberg) — Gold climbed to a fresh record, with traders weighing China’s plan to become a custodian of foreign sovereign gold reserves in a bid to strengthen its standing in the global bullion market.
The People’s Bank of China is using the Shanghai Gold Exchange to court central banks in friendly countries to buy bullion and store it within the country’s borders, according to people familiar with the matter. The Asian nation is the world’s biggest producer and consumer of the precious metal, and the country taking a bigger role in the global bullion market could mean looser import restrictions, or a broader role for gold in the financial services sector.
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Gold advanced as much as $3,791.10 an ounce on Tuesday, the third trading day in a row it hit the all-time high milestone.
Meanwhile, traders are waiting for a speech from Federal Reserve Chair Jerome Powell for fresh insight into the central bank’s monetary policy path. Investors have piled into exchange-traded funds — with holdings expanding at the fastest pace in more than three years on Friday — as expectations for further rate cuts this year grow.
After pulling back the day after the Fed’s 25 basis-point rate cut, upward momentum has taken root with ETF inflows still the driving force, BMO Capital Markets analysts, including Helen Amos and George Heppel, said in a note on Monday. “With a rate-cutting cycle firmly on the table, we think risk-reward remains positive for prices into” the fourth quarter.
Powell is due to give a highly anticipated speech on the economic outlook later on Tuesday, after the quarterly rate forecasts that accompanied last week’s rate decision — known as the dot plot — showed a wide dispersion of views. Several Fed officials on Monday reiterated the need for a cautious approach to rate decisions moving forward, including St. Louis Fed President Alberto Musalem who said that he sees limited room for more reductions amid elevated price pressures.
Gold and silver have been among this year’s best-performing major commodities on a broad confluence of supportive factors, as the Fed eases monetary policy, central banks bolster their reserve holdings, and lingering geopolitical tensions sustain a bid for havens. Banks, including Goldman Sachs Group Inc. have flagged their expectations for further gains.