Gold Stabilizes as Fed Tone Softens and Chinese Demand Rises
The price of gold has stabilized around $4,200 per ounce after two consecutive days of gains. The rebound is attributed to the Federal Reserve's softer tone and expectations of increased physical demand from China.
New York Fed President John Williams' speech at a university in Buffalo sparked an immediate response, as futures markets adjusted downward. The probability of another rate hike at the late-October meeting dropped below 50% after Williams stated that policymakers feel 'no rush' to act again and that a single additional hike would likely be enough to guide inflation back toward the 2% target.
The Conference Board's US consumer confidence index tumbled to its lowest reading since 2014, further supporting the shift in Fed expectations. Despite this, Williams' comments and the softening of rate expectations have provided a floor for gold prices.
Chinese demand has emerged as a dependable pillar for gold, with imports exceeding last year's total in the first eight months of the year. The People's Bank of China also increased its official reserves by 20 tonnes in August.