Gold and silver prices surged in London on Tuesday, driven by stronger demand signals from China and India. In Shanghai, gold prices hit a 10-week low at ¥890 per gram, but in dollar terms, they rose due to the Chinese yuan reaching a 4-year high against the USD. This currency shift created a strong incentive for bullion imports, offering a $22 per ounce advantage.
In India, ahead of the Diwali festival and the wedding season, domestic demand pushed gold prices up by $5.50 per ounce above import costs. This trend mirrors last year's pattern where investment demand offset declines in jewelry purchases, a shift now more pronounced in China as well.
The rally in gold reversed an earlier $35 per ounce drop after US data revealed a significant decline in pending home sales, down 11.3% year-over-year. Meanwhile, long-term borrowing costs for Western governments fell, with 10-year US Treasury yields dropping to 5.10% and France's borrowing costs falling below 4.90%.
Platinum and silver also saw gains, with platinum reaching a 1-week high above $1660 per ounce and silver climbing 2.8% before settling around $57.90 per ounce. Gold ETFs worldwide expanded by 0.3% last week, requiring a record 4,278 tonnes of bullion backing. Asia-listed funds accounted for nearly 1/5th of this growth, pushing the region back towards its May record share.
In India, financial regulator SEBI's recent 'nudge' led major mutual funds to suspend large new inflows into gold ETFs, aiming to curb bullion imports amid rising household investment demand.