Gold prices rose sharply in January

According to SunSirs' commodity price analysis system, as of January 29, 2026, the morning market price of gold futures was 1,243.40 RMB/gram, an increase of 27.26% compared to the price of 977.07 RMB/gram at the beginning of the month (January 1st).

On the 29th, gold prices continued to rise sharply. Regarding spot prices:

On January 29, 2026, the Shanghai Gold Exchange's midday benchmark price for Shanghai Gold (standard weight 1 kilogram, gold bars with a purity of not less than 99.99%; pricing contract) was 1,248.22 RMB/gram; an increase of 7.23 RMB/gram (0.58%) compared to the morning benchmark price of 1,240.99 RMB/gram; and an increase of 66.9 RMB/gram (5.66%) compared to the previous trading day's (January 28) midday benchmark price of 1,181.32 RMB/gram.

Futures Market:

On January 29, 2026, the benchmark Shanghai gold futures contract opened at 1,189.60 RMB/gram and closed at 1,249.12 RMB/gram, an increase of 7.88% compared to the previous day's settlement price of 1,157.88 RMB/gram.

The reasons for the surge in precious metal gold prices on January 29, 2026

On January 29, 2026, gold prices surged significantly, driven by a confluence of five key factors: escalating geopolitical risks, strengthened expectations of Federal Reserve interest rate cuts, a weaker dollar, continued central bank gold purchases, short-term fund short squeezes, and rising inflation expectations. These factors propelled international gold prices above $5,500 per ounce, and the main Shanghai gold futures contract rose by nearly 8%. The specific reasons are as follows:

1. Geopolitical risks erupted simultaneously, leading to a surge in demand for safe-haven assets

Middle East tensions: The US and Iran are escalating their confrontation over the nuclear issue, increasing the risk of military conflict, and driving a rapid increase in market risk aversion.

Concerns about spillover effects of the Russia-Ukraine conflict: Russian airstrikes on Ukraine have affected civilian infrastructure, raising concerns about a wider escalation of the conflict, leading to a surge of investment into gold as a safe haven.

Trade tensions between the US and Europe are escalating again: the Trump administration is planning to impose tariffs on goods from Europe and Canada, and this, coupled with the risk of a US government shutdown, is intensifying market concerns about global economic uncertainty.

2. Expectations of a shift in Federal Reserve policy and a weakening dollar increased the pricing advantage of gold

The Federal Reserve maintained interest rates at 3.5%-3.75% at its January meeting, sending a clear dovish signal. Market expectations are that the interest rate cutting cycle will begin in 2026, lowering the opportunity cost of holding gold.

Weak US economic data (such as declining manufacturing PMI and slowing job growth) reinforces expectations of interest rate cuts and simultaneously weakens the credibility of the US dollar.

The US dollar index fell to a nearly four-year low (around 98.5), making gold priced in US dollars more attractive to holders of non-US currencies and driving capital flows from dollar-denominated assets to gold.

3. Global central banks continued to purchase gold, solidifying a price floor

In 2025, global central banks purchased a net 1,136 tons of gold, and the amount of gold purchased in January 2026 reached a historical high. The People's Bank of China increased its gold holdings for 14 consecutive months, and countries such as Russia and Poland also increased their gold purchases.

Central bank gold purchases are a strategic allocation and are not sensitive to price, providing long-term, rigid support for gold prices and mitigating short-term downward pressure.

4. Inflation expectations were rising, highlighting gold's role as a hedge against inflation

The widespread increase in commodity prices has triggered expectations of "reflation," with the World Bank's precious metals price index projected to rise by 66% by 2025, indicating that inflationary pressure is being transmitted to the precious metals sector.

The Federal Reserve's potential balance sheet expansion and the widening U.S. fiscal deficit (with interest payments on government debt exceeding the defense budget) are exacerbating long-term inflation risks, increasing the attractiveness of gold as an inflation hedge.

5. Short-term funding squeeze and structural shortages accelerated price increases

The continuous record-breaking rise in gold prices has attracted speculative capital, leading to a structural shortage in the futures market and triggering a short squeeze, which has driven prices up rapidly.

Holdings in gold ETFs have increased significantly recently, with capital inflows further reinforcing the bullish trend.

Market outlook:

In the short term, geopolitical risks and market sentiment may continue to drive gold prices higher, but caution is needed regarding the risk of a correction due to Federal Reserve policy statements, a rebound in the dollar, and profit-taking. In the long term, if interest rate cuts materialize, central bank gold purchases continue, and inflationary pressures persist, the gold bull market may continue. It is recommended to monitor the Federal Reserve's February meeting, developments in the Middle East, and central bank gold purchase data.

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