Bank of China warned clients to strengthen risk management in precious metals markets as gold prices swung past $1,860 an ounce amid heightened geopolitical tensions and uncertainty over Federal Reserve monetary policy.
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BOC warns precious metals investors as gold swings past $1,860
Gold traded at $1,863.50 an ounce on COMEX, up 1% in a session, after Bank of China warned clients of intensified price volatility in precious metals markets.
BOC specifically flagged risks across its Gold Accumulation Plan, Gold Savings Plan, account precious metals and agency Shanghai Gold Exchange services, citing "massive uncertainties in global geopolitical conditions and the Federal Reserve's monetary policy," according to a notice dated June 12.
The warning comes as central banks globally added a net 77 metric tons to gold reserves in August, the third straight month of net purchases, according to the World Gold Council. China's central bank has increased its gold holdings for 13 consecutive months, with official reserves reaching 2,214.6 tons at the end of October, or 4.3% of total foreign exchange reserves. LBMA gold prices averaged a record $1,976 an ounce in the second quarter of 2023, 6% higher year-on-year, the council said.
The US federal funds rate sits at its highest level in 22 years after 11 rate hikes since March 2022, while US debt has reached a record $33.5 trillion, with a debt-to-GDP ratio exceeding 120%. Markets widely expect the Fed to begin a rate-cutting cycle next year, a shift that could further boost gold's appeal as a hedge against dollar asset depreciation.
China's gold jewelry demand rose 17% year-on-year to 328 metric tons in the first half of 2023, while demand for gold bars and coins grew 33% to 115 tons over the same period, World Gold Council data shows. The dual attributes of gold as a value-preserving asset and a consumer good have sustained interest even as spot prices hover near historic levels.
BOC advised customers to conduct rational investments based on their financial conditions and risk tolerance, to reasonably control precious metals positions, and to mitigate short-term price fluctuations through long-term investment. The notice covers all major precious metals business lines at China's fourth-largest commercial lender by assets.
This article is for informational purposes only and does not constitute investment advice.
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