Gold prices edged higher Wednesday as robust demand from central banks and anticipation of a September interest rate cut helped reverse losses the precious metal incurred earlier in the week.
The yellow metal rose $10.58 in late morning trading to $2,375 per ounce. Silver, meanwhile, was trading sideways, up $0.09 at $30.91.
At the midweek point, gold seemed to have shaken off Monday's market pressures, spurred by data that the Chinese government halted gold purchases for a second straight month in June after 18 consecutive months of acquisitions. The decision by the People's Bank of China to sit on the sidelines last month was counterbalanced by demand for gold from central banks in India, Poland, and the Czech Republic, which all increased gold reserves in efforts to diversify investments.
Even with China's lack of activity last month, "other central banks continue to participate, with India's central bank buying more than 9 tons of gold in June, the National Bank of Poland increasing its gold reserves by 4 tons, and the Czech National Bank showing that its gold reserves rose by some 2 tons in June," noted Bert Melek, head of commodity strategy at Canadian investment bank TD Securities.
"With these central banks continuing to build gold positions, it is quite evident that the official sector is much broader than just the PBoC," Melek added.
Investors also cherry-picked some encouraging soundbites from Tuesday's testimony by Federal Reserve Chairman Jerome Powell, who appeared before the U.S. Senate Committee on Banking, Housing and Urban Affairs. Powell acknowledged "considerable progress" in bringing inflation down to the Fed's 2% target and told lawmakers that "the risks to achieving our employment and inflation goals are coming into better balance."
In his second day of testimony on Capitol Hill, Powell appeared Wednesday before the U.S. House Financial Services Committee to present the Fed's semiannual Monetary Policy Report.
Wall Street is now preparing for Thursday's release of Consumer Price Index inflation data, as well as the weekly report tracking new unemployment insurance claims. Market sentiment has projected a 75% likelihood of an interest rate cut in September.
Gold Price Chart
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