Gold steadies amid expectations of higher-for-longer interest rates
Gold prices remained stable on Thursday amid a lack of strong momentum, as expectations that interest rates would remain elevated for longer weighed on market sentiment. Investors are awaiting comments from Federal Reserve officials to gauge signals regarding monetary policy.
Spot gold showed little change, holding at $4,342.41 per ounce. U.S. gold futures fell 0.1% to $4,379.30.
Gold is typically viewed as a hedge against inflation and geopolitical risks, but its appeal tends to wane when interest rates rise, as investors favor income-generating assets.
Chris Weston, head of research at Pepperstone, said investors would focus this week on oil prices and remarks from Federal Reserve officials, seeking clues as to whether the central bank is leaning toward raising rates again in October.
Weston added, “Although crude oil prices have pulled back slightly from their recent highs, any upward rebound that strengthens inflation expectations will likely intensify the focus on interest rates, and gold is expected to continue facing headwinds.”
Alberto Musalem, president of the Federal Reserve Bank of St. Louis, stated that the U.S. central bank would likely need to raise interest rates further to curb demand-driven inflation, as well as commodity price shocks that have extended beyond the oil sector. He added that it is better for the Fed to act early rather than wait.
On the geopolitical front, Houthi fighters moved on Wednesday to seize strategic high ground in Yemen, following reports that U.S. President Donald Trump canceled planned U.S. strikes on the group at the last minute.
Among other precious metals, spot silver fell 0.1% to $65.99 per ounce, platinum dropped 0.6% to $1,786.43, and palladium declined 0.4% to $1,296.40.
China spent a record amount on gold imports this year, as the central bank and domestic investors increased their holdings of the precious metal amid global geopolitical tensions and weak returns on local assets.
Total allocations by the world’s second-largest economy for gold imports reached approximately $158.8 billion during the first eight months of the year through August, to purchase 1,000 tons to bolster its physical reserves, compared with just $96.5 billion for the entire year of 2025, when it imported 886 tons of gold.
The surge in imports followed a reduction in China’s gold purchases last year, coinciding with a sharp rally that pushed prices from around $2,625 per ounce at the start of 2025 to a peak of $5,595 in January, according to the Financial Times, as reviewed by Al Arabiya Business.
China also maintained its position as the world’s largest gold producer, with output reaching 384 tons last year, according to data from the World Gold Council.
Data showed growing appetite among Chinese investors for gold as part of efforts to diversify assets and mitigate risks. Meanwhile, China’s holdings of U.S. Treasury securities fell to $618 billion in July, the lowest level since August 2008.
Lisa Liu, managing director of Gold Mountains Asset Management, a subsidiary of Zijin Mining, stated that the central bank and individual investors continue to shift a portion of their reserves and savings into an asset free of counterparty risk, as part of a long-term strategy to preserve wealth.
This shift comes at a time when domestic investment options have dwindled since the onset of China’s real estate market crisis in 2021. The CSI 300 index has fallen by approximately 1.8 percent since the start of the year and remains more than 20 percent below its record high set in early 2021, while yields on Chinese government bonds are approaching historic lows.
Liu noted that the current wave of gold buying does not represent a short-term bet, but rather reflects a prolonged reallocation of official assets and household wealth. She pointed out that the scale and persistence of Chinese demand have become key drivers of global gold prices, and she expects this trend to continue as long as economic and geopolitical uncertainty persists.
