Fed Hawkishness Weighs on Gold Prices Amid Central Bank Buying

Gold prices slipped on Wednesday due to hawkish Federal Reserve rhetoric and rising interest rates. The metal dropped by 0.9% to $4,321.60 an ounce after Fed officials reaffirmed their commitment to fighting inflation.

St. Louis Fed President Alberto Musalem suggested that persistently robust demand could warrant additional tightening, which led to a 90% probability of another rate hike by December in futures markets.

Central banks, however, continue to buy gold as part of their strategic reserve diversification efforts. According to the World Gold Council, official-sector net purchases totaled 345 tonnes in the first half of the year, with emerging-market institutions leading the charge.