Gold’s latest surge to fresh records has been fueled by a rush of buying activity in daily auctions — a sign that major players in the market are still adding to their holdings even at all-time high prices.
Bids for more than 400,000 ounces of gold were registered in the opening round of the afternoon auction on Thursday, the largest such volume since September 2019, according to a Bloomberg analysis of data from ICE Benchmark Administration, which runs the auctions.
The buying activity helped drive prices higher, with gold rising from US$3,116.60 an ounce when the auction began at 3 p.m. in London to US$3,143.15 by the time it concluded at 3:11 p.m. Within little more than an hour, it had touched a new record — a surge that continued on Friday as prices rose to US$3,244.
Traders and analysts typically associate major buying or selling activity in the auctions with central banks, which have been a key driver as prices soared above US$3,000 an ounce. Still, other groups of market participants have also been big buyers recently, with exchange-traded funds adding 5.8 million ounces of gold since the start of the year, according to data compiled by Bloomberg.
Formerly known as “the fix” and held in a wood-panelled room in the offices of N M Rothschild & Sons, the system of daily auctions has set benchmark prices for precious metals for more than a century.
Now held electronically, it has declined in importance as big banks have eschewed involvement in price benchmarks in the wake of the Libor fixing scandal, and as liquidity in other parts of the market have grown. Still, it remains an important price benchmark used in gold contracts around the world, as well as a window of increased liquidity for those looking to trade in large volume.
Dealers participating in the auction submit orders to buy or sell at the benchmark price, and then the price is adjusted until the volumes of buy and sell orders match.
On Thursday afternoon, the first round of the auction saw buy orders of 408,365 ounces — worth $1.3 billion — against sell orders of just 73,871. After 19 rounds of bidding and a sharp increase in prices, the volumes matched at about 360,000 ounces on both sides at 3:11 p.m.
Central banks have dramatically stepped up buying in the gold market since the sanctions on Russia’s central bank in 2022. Analysts are predicting that the high pace of purchases will be maintained this year, as Donald Trump’s trade war prompts countries to continue seeking to diversify their reserves.
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Jack Farchy and Mark Burton, Bloomberg News
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