Gold “Rapidly” in Thin Market: $5,500 Record Hit Again
Gold has once again exploded to a record high above $5,500 per ounce, driven by a weakening US dollar and investor outflows from government bonds and currencies. This rally felt wilder because market liquidity was thin, allowing price movements to be rapid and easily spread.
Gold bullion surged as much as 3.2%, extending the 4.6% surge in the previous session—its largest daily gain since the peak of the pandemic in March 2020. Year-to-date, gold has risen around 28%, while silver has risen nearly 65%, also setting new records. The combination of geopolitical tensions and the issue of the Federal Reserve's independence has fueled safe-haven appetite.
According to market participants, the rapid rally actually makes it more difficult for banks to take large positions. When banks reduce risk, transaction volumes decrease and the market becomes thinner—resulting in increased volatility. In such conditions, a small increase can trigger a larger buying impulse because the order book is less thick.
There are also technical factors that contribute to the surge, such as the gamma squeeze phenomenon. Simply put, when option sellers are “forced” to hedge, they buy futures contracts. In a thin market, this additional buying can cause prices to rise more rapidly, even without a surge in new physical demand—hence the apparent sharp rise and then a quick fall again.
In terms of the bigger story, the market is also starting to look beyond the Fed’s decision to hold interest rates. Speculation that policy could be more dovish going forward—including the issue of who will replace Jerome Powell at the end of the year—is driving interest in non-yielding gold. Additionally, the selloff in Japanese bonds, talk of yen intervention, and Trump’s comments about the dollar are fueling the “currency weakness trade,” making gold increasingly attractive to global buyers.
On Thursday afternoon in Asia, gold rose about 2% to $5,526.72/ounce (after briefly hitting a record $5,588.71). Silver was around $117.47/ounce after briefly hitting a record above $119. The Bloomberg Dollar Index weakened slightly on the day and is down about 1.4% for the week, keeping the precious metal within the currency bracket. (az)
Source: Newsmaker.id
