appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Themis Qi

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$4,326 an ounce at 4pm on Thursday in Hong Kong, up 1.52 per cent since the market opened at noon. The bullion once dived as much as 2.7 per cent to US$4,234 at 3am in Hong Kong, right after the Fed meeting.
The US central bank announced a widely expected 0.25 percentage-point rate rise early on Thursday, its first in three years, with the new Fed chair Kevin Warsh saying inflation had remained “too high for too long”.
The move followed weeks of market expectations for a quarter-point increase at the Fed’s September meeting, amid persistent inflationary pressures and renewed geopolitical tensions in the Middle East.
Investors were now shifting their focus to whether the Fed would raise rates again, a move that could trigger short-term volatility in gold prices, said Kenny Ng Lai-yin, a strategist at Everbright Securities International. He projected one more Fed rate increase by year-end.
Nearly 50 per cent of traders were betting on another 0.25 percentage-point rise in October, up from 43.5 per cent before the Fed meeting, according to CME FedWatch data based on Fed funds futures contracts on Thursday.
“But in the long run, the Fed rates will head downwards again because the United States is facing structural economic challenges, huge government debt and declining global central bank holdings of US Treasury,” Ng said.
Those factors could help push gold prices back to US$5,000 per ounce again next year, Ng added.
Meanwhile, UBS urged investors to look beyond a single Fed rate decision, arguing that purchases from central banks and recovering demand from China and India should support gold prices in the final quarter of the year, according to a note on Monday.
“Gold may still be vulnerable to hawkish surprises, but it appears increasingly more sensitive to positive catalysts,” said Joni Teves, precious metals strategist on the global economics and strategy research team at the Swiss bank.
Julius Baer shared a similar view that rate rises themselves, historically, had little market impact when fully anticipated. The bank cited market performance across 20 rate-rise days under former Fed chairs Janet Yellen and Jerome Powell.
After hitting an all-time high of above US$5,400 per ounce in January, gold prices surrendered as much as one-third of their gains this year amid concerns over the US-Israel war on Iran and soaring debt linked to major US artificial intelligence firms.
The metal regained investor interest in late July amid global diversification from the sell-off of artificial intelligence and semiconductor stocks.
UBS also said central banks continued to add to their gold reserves at “historically meaningful rates”. China increased its gold holdings for a 22nd consecutive month in August by some 650,000 ounces to reach 76.73 million ounces, while the Dutch central bank decided to move around 85 tonnes of gold from the US and Canada to London.
“Strong reported purchases would reassure investors that official demand can continue to support the market amid headwinds from expected Fed tightening,” Teves of UBS said.
ANZ analysts Soni Kumari and Daniel Hynes said in a report last week that US rate rises were unlikely to obstruct gold’s recovery.
“Gold’s sensitivity to US yields is shifting. Fiscal stress is becoming more relevant for gold, with investors increasingly focused on debt sustainability and currency debasement following the latest US Treasury intervention,” they wrote.
Institutional banks from JP Morgan to Goldman Sachs projected gold prices to range between US$4,500 and US$4,900 an ounce by the end of the year, according to their previous forecasts.


How Hong Kong’s new 5-year plan courts global capital with an eye on market dominance

Exchange Fund weighs bigger gold holdings to support Hong Kong’s trading hub plan

Gold rebounds after Fed rate rise as banks back long-term demand outlook

Hong Kong targets gold trading, FPS-UnionPay link to boost yuan use

Gold in Hong Kong

Gold prices have soared over the past couple of years amid rising geopolitical tensions and concerns over US debt levels. Photo: Shutterstock

Can Hong Kong outshine Singapore as central banks rethink gold custody amid global risks?

Where central banks store gold appears increasingly a growing priority for reserve managers, according to a Goldman Sachs report. Photo: Getty Images

Amid global risks, younger investors favour tangible bars as paper gold loses shine

Gold is no longer seen purely as an investment for older or wealthy investors, according to traders. Photo: dpa

Can gold hit US$5,000? Wall Street turns bullish despite US job growth fuelling rate fears

Gold is back in favour among investors even as expectations mount for higher US interest rates, which traditionally weigh on the metal. Photo: Reuters

Investors prepare for ‘super-central-bank week’ as US rate increase appears done deal

The Federal Reserve building in Washington. Photo: TNS

Business

Commodities

Markets

Investment banks say central bank purchases and demand from China and India should support bullion prices


Investment banks say central bank purchases and demand from China and India should support bullion prices.


Gold rebounds after Fed rate rise as banks back long-term demand outlook

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Investment banks say central bank purchases and demand from China and India should support bullion prices

Investment banks say central bank purchases and demand from China and India should support bullion prices