Gold Prices Surge Amid Diplomatic Thaw and Fed Interest Rate Uncertainty
The price of gold has risen to $4,215.40 per troy ounce, a 2.17% weekly gain, as reports suggest a diplomatic thaw in the Persian Gulf is reducing geopolitical risk premiums.
This development comes despite oil prices falling and the US dollar softening, which typically support gold prices. However, traders are now focusing on the Federal Reserve's interest rate hike prospects.
Market probabilities for a September rate hike slipped to 59% from 67%, making non-yielding assets like gold more attractive. Meanwhile, central banks have been accumulating gold at a record pace, purchasing 289 tonnes in the second quarter, and the World Gold Council expects global reserves to rise over the next year.
The Bank of Korea is also resuming physical gold purchases after a six-year hiatus, aiming to buy four to five tonnes annually from domestic production. This move reflects both geopolitical concerns and a desire to diversify away from the dollar.