Despite continued rate rises from the US Federal Reserve, gold prices are recovering as other central banks around the world buy up the precious metal and investors foresee softer rate hikes.Prices have been propped up by robust purchasing from central banks across fast-growing economies including China, India and Turkey, which are looking to pivot from the US dollar.The precious metal slumped to a three-week low last week, dropping from $1,956 per ounce to $1,861 per ounce last week, amid sustained rate hikes from the Fed.The US central bank hiked interest rates 0.25 percent after its Jan 31 – Feb 1 meeting to 4.5-4.75 percent – its eighth successive window of raising rates as it looks to tame inflation, which remained at 6.5 percent in December.However, continued demand overseas meant gold prices have rebounded, rising back to $1,883 per ounce in today’s trading.Rupert Rowling, market analyst at Kinesis Money noted that gold typically suffers in periods of rising interest rates, as interest-bearing assets become more attractive.This made its upward trajectory to near $1,900 per ounce “remarkable” in the context of a hawkish central bank.He said: “The gold market seems to have an element of traders and investors hearing what they want to hear rather than what is actually said as despite the Fed saying on Tuesday that further interest rate hikes are needed to fully curb inflation, his tone was interpreted as less aggressive than previous and therefore reason for gold to gain.“One factor that could well be keeping the gold price so supported is the strength of buying from central banks, including those in China, India and Turkey. As these fast-growing economies look to diversify away from the hegemony of the US dollar, these banks have bought considerable volume last year with that trend expected to continue into this year.”Craig Erlam, senior market analyst at OANDA, argued that gold had been due a correction from this year’s early rally, but warned that another slump was possible.Story continues“The yellow metal has been on a phenomenal run since early December and a correction was growing ever more likely,” Erlam said.“While traders have welcomed Powell’s consistent stance, it may not be enough to save gold and a deeper correction could well be on the cards. It’s seeing some support now but more substantial support may be found around $1,820-$1,830 per ounce,” he added.By CityAMMore Top Reads From this article on

Source link