Precious Metals Prices Surged Significantly in January

According to the Commodity Market Analysis System of 100ppi.com, as of the morning session on January 29, 2026, the spot market price of gold was 1243.40 yuan per gram, representing a 27.26% increase compared to the spot market price of 977.07 yuan per gram at the beginning of the month (January 1). Gold prices continued to rise sharply today. In the spot market: the afternoon session benchmark price for Shanghai Gold (standard 1-kilogram gold ingots with a fineness not less than 99.99%; pricing contract) on the Shanghai Gold Exchange on January 29, 2026, was 1248.22 yuan per gram. This was an increase of 7.23 yuan per gram (0.58%) compared to the morning session benchmark price of 1240.99 yuan per gram, and an increase of 66.9 yuan per gram (5.66%) compared to the afternoon session benchmark price of 1181.32 yuan per gram on the previous trading day (January 28). In the futures market: the main gold futures contract on January 29, 2026, opened at 1189.60 yuan per gram and closed at 1249.12 yuan per gram, representing a 7.88% increase compared to the previous day's settlement price of 1157.88 yuan per gram.

Reasons for the Sharp Rise in Precious Metal Gold on January 29, 2026

The substantial increase in gold prices on January 29, 2026, was primarily driven by the combined effect of five major factors: escalating geopolitical risks, strengthened expectations for Federal Reserve interest rate cuts, a weakening US dollar, continued central bank gold purchases, short-term funding squeeze/short covering, and a rebound in inflation expectations. These factors propelled international gold prices to break through $5,500 per ounce and drove the main Shanghai gold futures contract up by nearly 8%. The specific reasons are as follows:

1. Concentrated Outbreak of Geopolitical Risks, Leading to a Surge in Safe-Haven Demand

   • Tensions in the Middle East: Escalating confrontations between the US and Iran over nuclear issues have increased the risk of military conflict, rapidly heating up market risk aversion sentiment.
   • Spillover Concerns from the Russia-Ukraine Conflict: Russian airstrikes on Ukraine affecting civilian facilities have raised concerns about an expansion of the conflict, prompting funds to flow into gold as a safe haven.
   • Resurgence of US-Europe Trade Frictions: The Trump administration's plans to impose additional tariffs on Europe and Canada, coupled with the risk of a US government shutdown, have intensified market concerns about global economic uncertainty.

2. Expectations for a Shift in Fed Policy and a Weakening US Dollar, Enhancing Gold's Valuation Advantage

   • The Federal Reserve's January FOMC meeting maintained the interest rate at 3.5%-3.75%, sending clear dovish signals. The market anticipates the start of a rate-cutting cycle in 2026, which reduces the opportunity cost of holding gold.
   • Weakening US economic data (such as declining manufacturing PMI and slowing employment growth) has reinforced expectations for rate cuts while simultaneously undermining confidence in the US dollar.
   • The US Dollar Index fell to a near four-year low (around 98.5), making dollar-denominated gold more attractive to holders of non-US currencies and driving capital flows from dollar-denominated assets to gold.

3. Sustained Gold Purchases by Global Central Banks, Fortifying the Price Floor

   • Global central banks recorded net purchases of 1,136 tons of gold in 2025. In January 2026 alone, monthly purchases reached a record high. The People's Bank of China has increased its holdings for 14 consecutive months, while central banks in countries like Russia and Poland have also intensified their gold-buying efforts.
   • Central bank gold purchases represent strategic allocations that are relatively price-insensitive, providing long-term, rigid support for gold prices and mitigating short-term downward pressure.

4. Rebound in Inflation Expectations, Highlighting Gold's Inflation-Hedging Properties

   • Broad-based increases in commodity prices have sparked "re-inflation" expectations. The World Bank's precious metals price index accumulated a 66% increase in 2025, transmitting inflationary pressures to the precious metals sector.
   • The Federal Reserve's potential balance sheet expansion and the widening US fiscal deficit (with interest payments on national debt exceeding the defense budget) exacerbate long-term inflation risks, enhancing the appeal of gold as an inflation hedge.

5. Short-Term Funding Squeeze/Short Covering and Structural Shortages, Accelerating Price Increases

   • Gold prices continuously reaching new highs have attracted speculative capital. Structural shortages have emerged in the futures market, triggering a squeeze/short covering rally that rapidly drove prices higher.
   • Gold ETF holdings have increased significantly recently, with capital inflows further reinforcing the bullish trend.

In the short term, geopolitical risks and market sentiment may continue to push gold prices higher, but caution is warranted regarding potential pullback risks stemming from Federal Reserve policy statements, a US dollar rebound, and profit-taking. In the long term, if the rate-cutting cycle materializes, central bank gold purchases persist, and inflationary pressures remain unresolved, the gold bull market structure may continue.

It is advisable to monitor the Federal Reserve's February FOMC meeting, developments in the Middle East situation, and central bank gold purchase data.