Gold Prices Find New Floor Amid Fed Hikes

Despite the Federal Reserve's rate hikes, world gold prices have established a higher floor due to increasing central-bank buying and Asian demand.

The forces driving gold's long-term rise are not solely dependent on US interest rates. Central banks, particularly China's People's Bank of China, which bought 20.2 tonnes in August, are accumulating bullion as reserve assets.

This shift in central-bank behavior is driven by concerns over currency and geopolitical risks. Gold's value lies in its ability to diversify portfolios and hedge against inflation, making it an attractive asset for governments and investors.

The old relationship between gold and interest rates still holds, but the depth of demand underneath the market has changed. Supply remains relatively unresponsive to price fluctuations, contributing to a higher price floor.