Gold Finds Higher Floor Amid Central Bank Demand

Despite recent rate hikes by the Federal Reserve, world gold prices have found a higher floor due to changing market dynamics. Central banks are now buying bullion as a reserve asset, driven by concerns over currency, sanctions, and geopolitical risk.

China's central bank, the People's Bank of China, purchased 20.2 tonnes in August, its largest monthly addition since October 2023, taking official holdings to 2,387 tonnes. This trend is not a response to short-term monetary policy but rather a reassessment of concentration risk.

The IMF has noted that central banks are increasingly diversifying their reserves, and gold's share is rising. The metal's value lies in its lack of sovereign issuer credit risk, making it an attractive insurance asset in a fragmented financial system.