China Clamps Down on Gold Frenzy as US Inflation Fuels Record Rally

Gold's surge to a record weekend fix just shy of $5000 crowns a volatile week, propelled by cooling US inflation that sharpens expectations for Federal Reserve rate cuts. January's core CPI held at 2.5% annually, while headline inflation eased to 2.4%, aligning with forecasts but signaling a broader slowdown in price pressures. This data arrives as President Trump nominates Kevin Warsh to replace Jerome Powell, with bulls like David Einhorn forecasting more than two cuts by year-end, amplifying gold's appeal in a lower-rate environment.

Yet the real spark ignites from Asia, where Shenzhen authorities, backed by the People's Bank of China, banned leveraged and pre-priced gold deals after January's platform failures and wild swings. Ten government departments targeted slogans like 'Get rich by buying gold,' responding to 'unruly' Shanghai trading that US Treasury Secretary Scott Bessent flagged as prompting tighter margins. With markets shuttered for Chinese New Year until next week—ushering in the Year of the Horse—this intervention aims to quell retail speculation amid surging Asian ETF inflows, a key price driver per BCA Research.

Spot gold at $4977, up 1.12% intraday with a high of $5020, reflects this tug-of-war: safe-haven flows versus regulatory brakes. Low Comex open interest underscores Asia's dominance, with India's ETF success adding fuel. While supercore inflation ticked up, the dovish macro tilt—coupled with recession whispers—positions gold for balance around $5000, poised for the next rally if risks materialize. Miners' cash flows remain robust, insulating the bull market from early-year volatility. For investors, China's crackdown risks a momentum unwind, but Fed pivot hopes cement gold's structural bid.