The gold price spiked to $2,378 per ounce on Wednesday, a 3-week high, after new US economic data signaled slowing inflation and retail sales. This comes as China, the world’s largest gold consumer, prepares major fiscal stimulus expected to further boost gold demand.
With Chinese gold buying surging in 2024 while Western investment outflows continue, some analysts now see Shanghai overtaking London and New York as the driving force behind global gold prices.
“The Shanghai market has enough weight to dictate gold prices alongside traditional drivers like US rates and yields,” said Bernard Dahdah, analyst at Natixis.
Despite high interest rates causing physically-backed gold ETF outflows in the West, record prices persist due to central bank buying, Chinese consumer demand, and trading on Shanghai’s futures exchange.
US Inflation Cools, Rates Expected to Peak
April US retail sales were flat versus March, missing expectations. Core inflation slowed to 3.6% annually, a 3-year low. Markets now price just 4.87% for year-end Fed rates, expecting at least two cuts by year-end.
In contrast, cash-strapped China is resorting to infrastructure spending funded by its first major sovereign bond issue since 2018 – a ¥1 trillion ($140bn) offering this Friday alone.
The divergence saw US copper futures hit new all-time highs above $5 per pound on Chinese demand hopes, while platinum topped $1,060 an ounce and continued trading above palladium near $1,000.
With major economies charting opposing policy paths, gold appears poised to continue benefiting from haven and inflation-hedge demand in key Asian markets like China.
