Gold Holds Below $4,300 as Bond Yields Climb Globally
Gold price remained under the $4,300 per troy ounce after the end of Tuesday trading session, with global equity markets also lingering near 5 weeks' lows and bond prices sliding further ahead of the Fed's largely anticipated rate hike tomorrow.
As other leading central banks either move forward with hikes or signal plans to do so, borrowing costs for western governments climbed in bond markets, touching fresh multi-decade peaks.
Crude oil, meanwhile, stayed above $100 a barrel for the US benchmark WTI, as Russia turned down Ukraine's proposal to halt strikes on refineries and related infrastructure, while Saudi Arabia, another major oil producer, pledged a "firm" response to Houthi rebel attacks originating from Yemen and backed by Iran.
According to the latest commentary from ICBC Standard, the London bullion clearing arm of Chinese banking giant ICBC, growing oil prices will increase the possibilities of the Fed's interest rate hikes, which will put more pressure on gold.
Yet despite these near-term pressures on gold, the firm's outlook remains constructive further out, which is how the central banks all around the world still buy physical gold to diversify from the dollar.
A note from the World Gold Council pointed to accelerating official purchases by China in August, describing the People's Bank's reported 20-tonne reserve increase as its largest monthly addition since October 2023.
Goldman Sachs, digging into trade flows and other data to estimate gold buying that isn't officially disclosed, calculated China's actual central bank purchases at 35 tonnes for July, nearly double the roughly 20 tonnes the PBoC previously reported for that month.
Tomorrow all eyes will be on the Fed, as the market has priced in the possibility of a rate hike. Price volatility on both precious metals and equities may exaggerate depending on the result of the Fed's decision.
Related assets: Gold, Silver, Palladium, Platinum