Lunar Dragon Year Welcomes a High Demand for Gold

A week’s overview

Gold pulled back from last week’s rally from $2065, its one-month peak in February down to $2022. The drop in gold price helped the US dollar index climb further and the US dollar neared its highest level since December 11th. The drop in gold on Monday favoured the bearish precious metal traders.

US employment details that were released this week showed that the US economy added 353,000 new jobs which doubled the predicted number in January of 180,000 jobs. The unemployment rate held steady and the FED chair dismissed the idea of lowering interest rates at the beginning of March. The probability of a March cut is fast dwindling and it’s becoming increasingly likely that that first rate cut will happen later in the half-year mark in May or June. Gold is staying inside the $2020 to $2040 range as FED policymakers hold back from rate cuts. Tensions in the Middle East are keeping precious metal prices buoyant as investors turn to gold and silver as a safe haven in times of turmoil and unrest.

Chinese gold demand rises just before Lunar New Year

Aside from the economic and geopolitical state of the world contributing to keeping gold’s price floor at $2000, the rising demand for gold amongst Chinese investors is contributing to rising gold prices as well. Gold demand and sales are in high demand as the Lunar Dragon Year fast approaches despite the rising price of gold. Gold is seen as a symbol of good luck and fortune in Chinese culture and consumers will spend their year-end bonuses on dragon-shaped gold as a present to their family. Chinese gold consumption exceeded 1000 tons in 2023, increasing 9% from 2022.

Chinese investors have been piling into gold at one of the fastest paces ever. The fact that it’s difficult to get your money out of China to invest elsewhere has given gold a better image in Chinese investors’ eyes as a go-to investment. China's bullion demand alongside macro and geopolitical events in the Middle East to the expectation of interest rate cuts is giving gold its current tailwind.