Gold holds near record levels despite the first Fed rate rise in three years

Gold held steady on Monday, with traders focused on the Middle East and the rate outlook¹. It held its gains as oil prices declined². The Federal Reserve had raised rates the previous week for the first time in three years, and the European Central Bank had moved the week before that^1,2. A report from the Dubai market noted 18-carat gold slipping below Dh400 per gram, while arguing that relief on oil had let bullion withstand the headwind from the Fed⁹.

Quoted levels varied through the session. One report put gold steadying near $4,370 after the rate rise³. Another had it holding near $4,375 an ounce¹¹. A third described gold holding $4,355 as Fed tightening capped the upside while softer oil offered relief⁶.

Why it did not fall

Minneapolis Fed President Neel Kashkari said inflation remains too high and has spread far beyond rising oil prices¹¹. He was, as one account put it, first off the rank on 20 September in saying that pressures had broadened⁴. Rising rates ordinarily weigh on an asset that pays no yield, and one outlet headlined the session as gold rising instead of falling after the hike¹⁰.

Central bank demand is the most cited offset. The World Gold Council reported 289 tonnes of central-bank purchases in the second quarter and expects investment to remain the main demand driver⁷. Goldman Sachs continues to expect gold to ‘grind higher in the near term’, citing stronger-than-expected central bank purchases⁸. One trader note said much of the expected tightening already appears priced into ETF demand, with central bank purchases continuing to offset it⁵. Chinese central bank buying has been accompanied by positive inflows into Chinese gold ETFs⁶. Deutsche Bank pointed to reserve managers, Strait of Hormuz tensions and falling oil prices together¹².

Where the sources disagree

The central bank demand story is not unanimous. The Financial Times reported that disclosed central bank purchases are down almost 20 per cent in the year through July against the same period¹³. That sits awkwardly beside the ‘stronger-than-expected’ characterisation used in the same session^5,8.

One technical note set upside targets of $4,453 to $4,486, above its daily mean⁷. Trading Economics, by contrast, tied the day’s resilience simply to declining oil². SunSirs pointed to World Gold Council data on global central banks’ net gold purchases as the explanation for the move¹⁰.