Although gold gave back 2.5% of its gains last week amid signs of easing trade tensions, the sell-off could be brief, according to market watchers.
Gold surged to an all-time high of US$3,500 ($5,477) an ounce last week before a sharp reversal.
ANZ Economist Aaron Luk says following reports China’s considering suspensions of its 125% tariffs, Trump is expecting to wrap up trade deals with US partners looking for lower tariffs in three to four weeks.
“The precious metal was also under pressure amid questions over the Fed’s independence,” he notes.
“That’s despite Trump confirming that he will not cut short Chair [Jerome] Powell’s term.
“The sell-off could be short lived, with gold fever ripping through China.”
Luk says volumes on China’s futures markets have risen sharply as investors scramble for haven assets.
“Inflows in gold-backed ETFs in China have surged, prompting warnings from officials,” he says.
Discovery Alert Founder and CEO, and seasoned investor, John Zadeh says Chinese insurance companies have been mandated to invest 1% of their assets into physical gold by the end of 2025, “a strategic move with far-reaching implications for the global gold market”.
“This directive alone will draw down approximately 400 tons of gold, representing a significant 8% of annual mine supply worldwide,” he notes.
“Even more impactful is the decision by the 10 largest state-owned Chinese pension funds to convert 1% of their assets to gold, a move set to absorb an astonishing 30% of the gold market.
“When combined with unofficial People’s Bank of China (PBOC) monetary gold demand, this could reach 40% of available supply globally.”
This increased appetite for gold could see the precious metal potentially fetching US$3,700 an ounce by the end of the year according to Goldman Sachs’ estimates.
This is a recent upwards revision to the investment bank’s previous forecast of US$3,300 an ounce.
At the time of writing, gold was trading at around US$3,314 an ounce.
Meanwhile, the S&P/ASX200 was up 0.96% in early trade, advancing 76.4 points to 8,044.6 points by 10.30am (AEST).
Six of the 11 sectors were higher shortly after the opening bell on Monday (28 April). Industrials dropped 0.58%, while utilities was up 0.21% and energy inched up 0.1%.
Capstone Copper (ASX:CSC) was among the early movers, adding 3.33% to trade at $7.76, while gold miners Ramelius Resources (ASX:RMS) and West African Resources (ASX:WAF) dipped 2.52% to $2.52 and 2.48% to $2.36, respectively.
The S&P/ASX200 is Australia’s leading share market index and contains the top 200 ASX-listed companies in terms of market capitalisation, and accounts for about 80% of the country’s equity market. The index is designed to measure the performance of the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalisation.
It is recognised as the institutional investable benchmark in the country.
Write to Angela East at Mining.com.au
Images: ASX & Stock
