Gold Bounces to Near $4,360 on Diplomatic Hopes

The price of gold rebounded to near $4,360 during the early Asian session on Wednesday as hopes for diplomatic progress between the US and Iran boosted investor sentiment.

The precious metal has been under pressure due to a hawkish stance from the Federal Reserve, which raised its policy rate by a quarter of a percentage point last week and signaled more hikes in the coming months. However, the recent reports of a 'very good meeting' between US officials and Iran's delegation have provided a much-needed boost to gold prices.

According to St. Louis Fed President Alberto Musalem, the central bank will likely need to hike rates further to lower inflation resulting from strong demand as well as a commodity price shock that has moved beyond oil. This hawkish stance could weigh on the yellow metal, but for now, gold is benefiting from diplomatic hopes.

The Commerzbank analysts highlighted China's outsized role in this year's bullion market, noting that the country imported more than 1,000 tons of gold in the first eight months of the year, already exceeding last year's total. Official sector activity has also intensified, with the Chinese central bank purchasing a good 80 tons of gold between January and August.