The price of gold has just passed through a strong volatile week with a transaction amplitude of up to 70 USD. Information about the US proposing import tax on Canada and Mexico has caused shock in the financial market.
These developments have increased rumors about the direction of the US Federal Reserve (Fed) in the context of the new government just inaugurated. After suspending the cutting interest rate last month and accepting the "waiting and reviewing" policy, the Fed may experience many probability in the process of monetary policy management.
The US bond market warned that the impose of taxes on the main trading partners could increase inflation and slowly pull the economic growth momentum. When the import price is higher, the risk of inflation will increase, leading to the risk of stagflation (high inflation and slow growth). In this context, the Fed can maintain the current interest rate or under pressure to reduce interest rates many times this year.
The fact that central banks continue to diversify gold reserves will be an important factor for gold and silver prices. Individual investors and techno funds are increasing the holding of gold as a measure of economic growth and labor market decline. Future trading products with small scale, such as 1 ounce gold contract, can help investors easily access this market.
Silver can also benefit from the rising momentum of gold, especially when the US and China continue to confront the long trade war. Remarkably, Dong is the best performance metal to the present of the year, due to the high demand from China - the largest consumer country in the world.
This trend often goes ahead of a price increase of the silver market due to strong industrial relationships. With these developments, gold and silver are likely to remain sought after in the context of economic instability.
Krishan Goroalul, senior analyst for the EMEA region at the World Gold Council (WGC), commented that gold prices continue to be supported when central banks start in early 2025 by increasing reserves and maintaining strong gold buying trends like at the end of 2024.
Analysts are paying special attention to China. This is the third consecutive month that the People's Bank of China has increased its official gold reserves, after a six-month pause, ending the previous 18-month gold purchase.
“Buying last month took China’s total gold reserves to 2,285 tonnes,” Goroul said.
Despite a significant increase in holding gold, the amount of gold in China's foreign exchange reserves currently accounts for only about 5% of total foreign exchange reserves. Analysts say China still has a lot of room to raise this rate to 10%, more suitable for central banks in developed markets.
Not only China buys gold. Gopaul also quoted data from the Polish National Bank, showing that they bought 3 more tons of gold in January. In Europe, Gopaul said that the Czech National Bank also bought 3 tons of gold in the month in the month. 1. Meanwhile, Uzbekistan is the most buying gold country in January when their central bank bought 8 tons of gold.
