Gold Defies Rate Hike Expectations with Stable Prices

Gold prices have defied expectations by remaining relatively stable despite the US Federal Reserve's interest rate hike on Wednesday. The increase was expected to put downward pressure on gold, but instead, bullion rose nearly 1% to around $4,340 per ounce.

The relationship between interest rates and gold is well-established, with rising rates typically leading to increased attractiveness of cash and bonds over gold due to its lack of yield. However, some experts believe that other factors are now more influential on gold prices than interest rates.

Central bank buying, sovereign debt levels, investor demand through ETFs, oil prices, inflation, geopolitical instability, and other economic indicators are all playing a significant role in determining the direction of gold prices.

A recent increase in US government debt to over $40 trillion has raised concerns about debasement and the need for lower interest rates to service the debt. This theme is now seen as more powerful than interest rates in driving gold prices, according to some analysts.