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A daily guide to the energy and commodities markets that power the global economy, from journalists stationed around the world.
A daily guide to the energy and commodities markets that power the global economy, from journalists stationed around the world.
A daily guide to the energy and commodities markets that power the global economy, from journalists stationed around the world.
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Welcome to our guide to the commodities driving the global economy. Today, senior reporter Alfred Cang explores the limits of China’s tolerance for volatility in precious metals.
The global gold market has been shaken by an abrupt pullback from record highs, but in China — where speculative investment drove the market to a tipping point — this is a story that many have seen before.
The asset may have changed, with bullion assuming a role once taken by stocks and later by wealth-management products, property and even cryptocurrencies, but the story is consistent: a search for tangible assets against a backdrop of diminishing returns from the real economy.
How China tackles such frenzied bouts of investment can have global repercussions, as precious metals are now seeing.
Policymakers in Beijing generally take a pragmatic approach. Trends that repurpose existing money pools without jeopardizing financial stability are tolerated, and even encouraged as an outlet for investors caught in a persistent deflationary environment.
But this tolerance has limits. When households become heavily leveraged, or prices detach from underlying assets, policy attitudes shift quickly. Where large amounts of liquidity are concerned, volatility can become an issue of social cohesion.
So far, authorities have remained on the sidelines. There is no suggestion that the government – which, for example, took extreme steps in 2024 to restrict short selling and quantitative trading strategies – is seeking to intervene in gold.
Metals, however, have undeniably crossed into risky territory, with novice investors wiped out by the sharp market reversal and at least one scandal brewing in the trading chain. Protests outside a store in Shenzhen last month laid bare the extent of disruption caused by speculative gold buying.
A more fundamental risk is that excess liquidity, with nowhere else to go, will shift the emphasis away from the real economy; that entrepreneurs will come to value balance sheets over manufacturing growth, and talent will gravitate toward trading rather than engineering.
Seen in this historical context, gold is just the latest test of China’s tolerance for investment. The government’s aim is not to suppress this trend, but to ensure that it isn’t allowed to harden into systemic risk.
— Alfred Cang, Bloomberg News
Chart of the day
Gold and silver rebounded after a historic collapse from all-time highs lured dip-buyers back to precious metals. Spot gold climbed as much as 6.2% to near $4,950 an ounce, recovering somewhat from its worst rout in more than a decade. Silver at one point rose more than 10% as a risk-on tone returned to wider markets and the US dollar weakened.
Top stories
President Donald Trump said he would roll back punitive tariffs on India in return for an agreement that Prime Minister Narendra Modi would stop buying Russian oil, easing months of tension between the two countries.
Orsted A/S agreed to sell its European onshore business to Danish investor Copenhagen Infrastructure Partners for €1.4 billion ($1.7 billion), as the company completes a divestment plan.
BlackRock Inc.’s Global Infrastructure Partners has teamed up with EQT AB in its bid to acquire power company AES Corp., according to people familiar with the matter.
China’s state-backed metals industry group is calling for more copper in the country’s strategic stockpiles, a move that would add to upward pressure on prices and highlight a growing push by governments to bolster supply security.
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BNEF today
Hybrid trucks and vans are emerging as a fast-growing business for Chinese commercial electric-vehicle makers expanding abroad, according to BloombergNEFBloomberg Terminal. Exports of such vehicles more than quadrupled last year to around 53,000 units, according to official customs data. Manufacturers have used the low-emissions powertrain to break into markets early in the electrification journey.
Coming up
Bloomberg Invest: Join the world’s most influential investors and financial leaders in New York on March 3-4 to examine how artificial intelligence, geopolitical uncertainty, shifting central-bank policy and the convergence of public and private markets are reshaping global finance. Learn more here.
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