Gold Prices Soar Amid China's Record Buying Spree and Geopolitical Tensions

Gold prices have been steadily rising over the past two months, with a recent surge of nearly 11% pushing year-to-date gains to around 33%. The metal currently sits just beneath its two-month high, with traders anxiously awaiting Wednesday's US consumer price index report that could significantly impact the Federal Reserve's rate path. A hotter-than-expected reading could force the Fed to hold rates steady or even hike them.

However, China's Central Bank has been actively accumulating gold reserves, with a 20-tonne increase in July and a 15-tonne increase in June, the largest monthly build since October 2023. This buying spree is not limited to China, as central banks globally are replenishing reserves at an unprecedented rate, with Beijing remaining the dominant force.

The unresolved standoff between the US and Iran has also contributed to gold prices, with hopes for a deal that would end hostilities and reopen the Strait of Hormuz keeping prices elevated. Market participants have taken notice, with spot trading volume jumping 95% within a single week and open interest in futures expanding at a similar pace.