Gold falls below $4,300 on Fed hawkish signals

Gold prices fell below $4,300 on Thursday as Federal Reserve (Fed) policymakers expressed hawkish sentiments, increasing expectations of rate hikes. This news prompted traders to consider the Fed's outlook for further policy adjustments to control inflation. The probability of a quarter percentage point rate increase in October rose to 69.7%, up from 48.7% a week prior.

Rates typically exert downward pressure on gold, which yields no interest, making interest-bearing assets more appealing. Recent hawkish Fed speeches have suggested at least one more rate hike before the year's end, further putting gold under pressure. Sources attributed the surge in China's physical gold demand to cheaper prices, a stronger yuan, and domestic price premiums.

Analysts noted that Chinese gold imports rose by 39.3% year-on-year, reaching a record 1,141.2 tonnes. The Federal Reserve's most hawkish governor, Michael Barr, suggested further rate hikes were likely needed to return inflation to the 2% target. The Fed Sentiment Index climbed to 148.81, indicating a strongly hawkish stance. Gold has historically served as a store of value and a hedge against inflation, currency depreciation, and geopolitical instability. Central banks often add gold to their reserves to bolster their currencies during turbulent times.