China’s central bank aids gold’s record-setting run with 11-month buying streak
News Summary
Gold prices have surpassed US$4,000 per ounce, setting new records in both London spot and New York futures markets. This surge is fueled by China’s central bank extending its gold buying streak to an eleventh consecutive month, alongside growing safe-haven demand amidst an ongoing US government shutdown. Investment bank Goldman Sachs lifted its December 2026 gold price forecast to US$4,900 per ounce, citing inflows from Western exchange-traded funds and the likelihood of further central bank purchases. Billionaire investors Ray Dalio and Ken Griffin both echoed that gold is a superior safe haven to the US dollar, with Dalio suggesting an "optimal mix" of around 15% portfolio allocation to gold.
Background
Gold has long been considered a crucial safe-haven asset, particularly during periods of economic uncertainty or geopolitical tension. Central banks globally, especially in emerging economies, have been significant buyers of gold as they diversify foreign reserves and hedge against potential U.S. dollar depreciation. A U.S. government shutdown occurs when Congress fails to pass appropriation bills, leading to a partial closure of government agencies. Such events typically trigger market concerns about economic growth and can erode investor confidence in dollar-denominated assets. Under incumbent U.S. President Donald J. Trump's administration, government shutdowns are not unprecedented, reflecting the ongoing impact of political polarization on economic policy execution.
In-Depth AI Insights
What are the deeper strategic motivations behind China's continued gold accumulation? - This goes beyond simple reserve diversification. China is likely executing a long-term strategy to reduce over-reliance on U.S. dollar reserves, especially amid escalating geopolitical and trade tensions with the U.S. - Consistent gold buying helps fortify the Renminbi's standing in the global financial system and provides a potential buffer against Western financial sanctions. - Furthermore, this move could signal China's underlying concerns about the global economic outlook, viewing gold as the ultimate hedge against inflation and systemic risks. What do the U.S. government shutdown and diminished dollar appeal signify for the global monetary system? - Frequent U.S. government shutdowns, even in President Trump's second term, highlight structural weaknesses in the U.S. political system. This erodes the image of the dollar's stability as the world's primary reserve currency. - The shift towards gold and comments from prominent investors like Ray Dalio and Ken Griffin suggest a market re-evaluation of the dollar's 'risk-free' status. This could accelerate the trend of global reserve diversification, potentially weakening dollar hegemony in the long run. - In a multipolar world, dollar vulnerability might push more nations to seek alternative reserve assets and even explore new international payment and settlement mechanisms. What are the implications of gold's record surge for the future investment landscape? - Gold breaking the psychological US$4,000/ounce barrier suggests it's not just a hedge but potentially entering a new structural bull market cycle. This reflects the market's pricing of global macroeconomic and geopolitical risks far higher than before. - Increased gold allocation by institutional and retail investors could be driven by its perceived role as a critical defense against 'stagflationary' risks (high inflation coupled with low growth). This trend may attract further inflows. - Upward revisions in gold price forecasts by institutions like Goldman Sachs often further fuel market sentiment. However, investors should remain vigilant about potential short-term pullbacks, especially after rapid gains, but long-term structural support appears robust.