Gold Prices Stabilize Amid Rising Rate Hike Expectations
The price of gold has stabilized after three consecutive weeks of decline, as investors reassess their expectations for Federal Reserve policy following hotter-than-expected US inflation data.
US inflation rose in August, with the core consumer price index increasing 0.3% from a month earlier, according to data released on Friday. This development has raised the likelihood of a rate hike by the Fed, which could have negative implications for gold as it doesn't pay interest and higher borrowing costs typically weigh on its value.
Despite this near-term headwind, many investors still believe that gold will increase in value over time as it reclaims its traditional role as a portfolio hedge. Yuxuan Tang, Asia head of rates & FX strategy at JPMorgan Private Bank, noted that even if the Fed hikes interest rates, bullion would remain well-supported in the medium term due to increasing recession risk.