Gold rebounds after Fed rate rise as banks back long-term demand outlook
Gold prices bounced back after the US Federal Reserve’s interest rate increase, as analysts and investment banks maintained a positive long-term outlook for the metal, citing structural challenges facing the world’s largest economy. Spot gold traded at US$4,288 an ounce on Thursday morning in Asia, after diving as much as 2.7 per cent to US$4,234 at 3am in Hong Kong on Thursday. The US central…
The US Federal Reserve raised interest rates by 0.25 percentage points on Thursday, marking its first increase in three years. This move, aimed at addressing persistent inflation, sparked a rebound in gold prices. Analysts and investment banks, including UBS and Julius Baer, expressed confidence in gold's long-term potential, citing structural economic challenges, government debt, and declining central bank holdings of US Treasury bonds in the United States as long-term factors that could help push prices back up to US$5,000 per ounce.
The central bank's chair, Kevin Warsh, noted that inflation had remained "too high for too long." While investors braced for potential short-term volatility following the rate hike, UBS's Joni Teves highlighted that gold prices are increasingly sensitive to positive catalysts, such as purchases from central banks and recovering demand from China and India.
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