Gold Prices Hover Just Below Record on Central-Bank Buying and Market Caution

Highlights:

• Gold traded at US$3,761 an ounce at the time of writing, hovering just below its record.
• Fed Chair Jerome Powell flagged risks to jobs and inflation but gave no signal on the next rate move.
• The rally in bullion remains supported by significant ETF inflows and consistent buying by central banks.

Gold Nears Historic Levels

Gold prices remained close to record highs on Wednesday, with the precious metal trading near US$3,761 an ounce at the time of writing, roughly US$30 below Tuesday’s peak. The latest surge comes after three consecutive sessions of gains, as investors weighed commentary from Federal Reserve officials alongside rising geopolitical tensions involving Russia.

Fed Comments Stir Market Expectations

Federal Reserve Chair Jerome Powell noted that risks to both the labour market and inflation outlook persist, but he refrained from hinting at whether another rate cut could be expected in October. In contrast, Fed Governor Michelle Bowman suggested the central bank may need to accelerate monetary easing if economic conditions weaken further. The mixed messages have left investors uncertain about the Fed’s next policy steps, fuelling demand for gold as a safe-haven asset.

Broader Drivers of the Rally

Gold’s performance has been bolstered by a combination of supportive factors. Last week’s Fed rate cut, alongside robust central-bank purchases, has provided a strong foundation for the rally. Additionally, news that China is exploring the role of custodian for foreign sovereign bullion reserves added further momentum. Investor appetite through exchange-traded funds (ETFs) has also played a pivotal role. Inflows hit a three-year high on Friday, with bullion-backed ETFs expanding nearly 400 tonnes so far this year, apart from a brief dip in May. With geopolitical tensions and monetary policy uncertainty dominating headlines, analysts suggest gold could continue to test new highs in the weeks ahead.

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