Gold Defies Rate Hike Expectations with Resilient Price Rise

Gold prices rose close to 1% after this week's rate hike, defying expectations that it would stall the recent rally. The increase in US interest rates has historically led to a decline in gold prices due to its inverse correlation with real interest rates.

However, some experts believe that other factors are now driving gold prices, including central bank buying and the debasement theme. According to Adriatic Metals founder Paul Cronin, central banks will continue to unwind their exposure to the US dollar via gold purchases.

Cronin stated in an interview with Stockhead that he has never been a strong gold bull but is now positive on its prospects due to the large US government debt and the need for lower interest rates to service it. The US government debt has surpassed $40 trillion, making the case for debasement stronger.

Investors haven't been perturbed by the prospect of tighter monetary policy, with gold ETF holdings recording eight consecutive days of increases, and demand for options on some of the biggest gold-backed ETFs being strong. The World Gold Council reported that global gold-backed ETFs added $18 billion in August, lifting cumulative holdings to 4,189 tonnes, the highest on record.