Bessent: The Reason for Gold Fluctuations is the Chinese Markets

Dollar's Rise and Volatility in Gold Markets

U.S. Secretary of the Treasury Scott Bessent stated that the sharp fluctuations observed in the gold market last week were influenced by Chinese investors. In remarks to Fox News, Bessent emphasized that market conditions in China have 'gotten a bit out of control,' leading authorities to feel compelled to tighten margins.

Impact of Speculative Purchases

Bessent likened the rise in gold to a classic speculative peak movement, noting that speculative purchases in precious metals have been supported by geopolitical tensions and concerns regarding the independence of the U.S. Federal Reserve. However, this rally unexpectedly reversed last week.

Market Volatility and Dow Jones

This volatility in the markets has contributed to the dollar gaining 5% in a week since the beginning of January. Additionally, the Dow Jones Industrial Average has surpassed 50,000 points for the first time, buoyed by optimism about the U.S. economy and corporate profitability. Bessent interpreted the upcoming mid-term elections in November as an indication that this record level reflects a rising economic cycle that benefits ordinary Americans.

Fed and Future Expectations

Bessent expressed that he expects the Fed to proceed cautiously in its steps to shrink its balance sheet. Reminding that the Fed has shifted to a loose reserve regime, he noted that this situation requires a larger balance sheet and that it might take at least a year for the institution to decide on how to proceed.

Finally, Bessent emphasized that President Donald Trump's nominee for Fed chair, Kevin Warsh, would act independently but would be aware of the Fed's responsibility to the American public. He indicated that if Warsh does not proceed with interest rate cuts as favored by Trump, it would ultimately be Trump who decides whether to take legal action.