(Bloomberg) -- Gold recovered from a two-month low as Chinese buyers returned from a weeklong holiday that kept activity muted in Asian markets, while traders assess the outlook for energy prices and interest rates.
Bullion edged higher to trade near $4,120 an ounce. Prices are still headed for a third weekly loss, following a 1.3% drop Wednesday on a report that the White House is considering options to strike Iran.
Gold has dropped by about a fifth since the US-Iran war erupted in late February as surging energy costs stoke inflation and prompt central banks to tighten monetary policy, a headwind for the non-yielding precious metal.
Still, purchasing from central banks continues to offer some price support. The People’s Bank of China, one of the largest gold buyers, added about 23 tons to its holdings in September, the biggest monthly bout of buying since 2023. Central bankers gathered in Italy this week stressed the precious metal’s role in diversifying reserves amid geopolitical uncertainties.
Focus remains on the Federal Reserve’s next move, with traders pricing in only a one-in-five chance of a rate hike in October, but a roughly 80% probability in December. The minutes from the last US Federal Reserve meeting showed that all 19 policymakers backed the September hike decision, and most expected another would be appropriate by year-end.