Gold Defies Interest Rate Hike with Record Institutional Demand
The gold market has shown remarkable resilience in recent weeks, defying expectations that higher interest rates would weaken its price. Despite the Federal Reserve's rate decision last Wednesday, which initially knocked prices lower and briefly bolstered the dollar, buyers stepped back in, propelling gold to a 0.9% daily advance on Friday.
The gain extends a 2.8% run since the Fed's rate decision, leaving the metal 1.8% above its 50-day moving average of USD 4,304.21. Large investors have treated recent volatility as an entry point, rather than retreating in the face of tighter monetary conditions.
The physical gold ETF market has been a key driver of this trend, with funds taking in USD 18 billion worldwide in August, the second-largest monthly haul on record. This has lifted total assets under management in the category to USD 615 billion, indicating that institutional players are adding exposure instead of trimming it.
The steady demand from central banks is also a crucial factor, with monetary authorities buying 288.9 tonnes during the second quarter of this year, a 62% jump from the same period last year. The World Gold Council survey found that 45% of central banks intend to expand their holdings within the next twelve months.