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Gold Hits New Record Price in China as Crude Oil Slips Despite Red Sea Violence

GOLD PRICES set a new all-time high in No.1 consumer nation China on Monday and steadied around last week's near-record Friday finish in US Dollars, while crude oil lost its recent gains despite conflict intensifying further in the key global shipping route of the Red Sea, writes Atsuko Whitehouse at BullionVault.
The Shanghai Gold Exchange's afternoon benchmarking auction hit a fresh record above ¥482 per gram as the Chinese stock market fell after the country's central bank left its key lending rate unchanged – disappointing hopes for new monetary stimulus.
Taiwan's equity market rose, in contrast, after the ruling Democratic Progressive Party won a third-straight national election with pro-independence candidate Lai Ching-te elected as President.
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Bullion prices in London slipped $3 from Friday afternoon's benchmarking at $2055 per Troy ounce of gold – the 3rd highest ever – as US forces continued to hit Houthi military sites in Yemen in a bid to stop the Iran-backed militants attacking shipping in the Red Sea, attacks they say are in protest at Israel's invasion and bombardment of Gaza, begun after the Hamas terrorist group's atrocities across southern Israel committed 100 days ago.
"Range bound crude oil and gold both received a boost as tensions in the Middle East moved up a notch," says derivatives platform Saxo Bank's commodity strategist Ole Hansen.
"[But] gold's 'geopolitical bar' is high," says Nicky Shiels, head of metals strategy at Swiss bullion refining and finance group MKS Pamp, "so the path it takes won't be linear & fast unless there's much further escalation."
Oil prices pared early gains on Monday, with Brent crude futures contracts slipping 0.7% from Friday's 2-week highs as US West Texas Intermediate also lost 0.7%, down to $72.11 a barrel and almost reversing the previous session's near-1% gain.
Crude oil prices began last week weaker after major producer Saudi Arabia cut its official selling price to all regions, highlighting concerns about weakening global demand.
Chart of gold price vs. WTI crude oil. Source: BullionVault
"The realisation that oil supply has not been adversely impacted [by the Red Sea conflict] is leading last week's bulls to take profit," reckons Tamas Varga of oil broker PVM.
After the US and UK launched multiple airstrikes on Houthi military sites Friday – a move condemned as unnecessarily provocative by Russia and Iran, as well as by their fellow Nato member Turkey – the US struck another Houthi-controlled site in Yemen on Saturday, and US fighter aircraft yesterday then shot down an anti-ship cruise missile fired from Yemen toward a US destroyer in the southern Red Sea.
Several tanker lines are now steering clear of the Red Sea, with multiple vessels changing course Friday to sail around South Africa, adding time and cost to Asia-Europe freight.
Electric-automaker Tesla's German factory has now halted production until at least mid-February because of the delay in receiving key components.
"The situation [is] not yet a 'red flag' for the global economy," says Ana Boata, head of macroeconomic research at international insurers Allianz Trade.
"[But] the impact on global supply chains could become more severe" if the fighting and Houthi attacks continue beyond the first half of the year.
With the Chinese New Year holidays – now the world's largest single gold-buying festival, ahead of Diwali in India – starting in less than 4 weeks' time, leading jewelry group Chow Tai Fook (HKG: 1929) today said its sales grew by 46.1% in the final 3 months of 2023, confirming heavier Chinese household gold demand.
Japan's Nikkei 225 continued its record-breaking run meantime, and crossed the 36,000 mark to set near-34 year highs for the 5th straight trading day.
In contrast, European stocks fell 0.3% on the Stoxx Europe 600 after Germany's Federal Statistics Office said the region's largest economy contracted 0.3% in 2023.
Wholesale bullion rose 0.4% in Euro terms to €1877 per Troy ounce and added 0.3% for UK investors, also nearing 1-week highs, above £1614.
The price of silver – which finds nearly 60% of its annual demand from industrial uses – edged lower by 0.1% to $23.17 per ounce.
That weakness pushed up the Gold/Silver Ratio – which tracks the two formerly monetary metals' relative prices – to just under 89, the highest value for gold versus silver in 10 months.
The Dollar index – a measure of the US currency's value versus its major peers – edged higher in a thin-volume trading session, as the US stock and bond markets are closed on Monday to observe Martin Luther King Day. 

Atsuko Whitehouse is the Head of the Japanese Market at BullionVault and the Editor of Japanese GoldNews.

See all articles by Atsuko Whitehouse here.

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