Gold prices experienced a notable increase following the recent Federal Reserve meeting, with the price briefly exceeding USD 4,100 per troy ounce, according to Commerzbank’s Carsten Fritsch. This rise was attributed to markets reducing their expectations for further Fed rate hikes, although Fed funds futures still indicate the possibility of additional tightening due to persistent inflation pressures [1].
Despite the price surge, the World Gold Council (WGC) data highlights weak jewellery demand and only modest, though positive, ETF inflows. Commerzbank anticipates that central bank gold purchases will remain robust, driven by portfolio diversification and hedging against inflation and risks, but these purchases are expected to be below last year’s levels [1].
The persistent expectation of further Fed interest rate increases is seen as a counteracting force to any sustained rise in the gold price, as inflation has not yet shown sufficient signs of easing. For the second half of the year, the WGC does not foresee any significant upturn in gold demand [1].
CONCLUSION
Gold prices have been buoyed by reduced Fed rate hike expectations, but ongoing inflation concerns and weak demand are likely to limit further gains. Central bank buying remains a supportive factor, though at lower levels than last year, suggesting a cautious outlook for gold in the near term.