Gold rebounds after Fed rate rise as banks back long-term demand outlook

Investment banks say central bank purchases and demand from China and India should support bullion prices

Gold prices bounced back after the US Federal Reserve’s interest rate increase, as analysts and investment banks maintained a positive long-term outlook for the metal, citing structural challenges facing the world’s largest economy.

Spot gold traded at US$4,288 an ounce on Thursday morning in Asia, after diving as much as 2.7 per cent to US$4,234 at 3am in Hong Kong on Thursday.

The US central bank announced a widely expected 0.25 percentage-point rate rise early on Thursday, its first in three years, with the new Fed chair Kevin Warsh saying inflation had remained “too high and too long”.