Gold prices rebounded on Wednesday amid the anticipation of a Federal Reserve (Fed) rate cut in September. Fed officials are scheduled to speak later on Wednesday, including Austan Goolsbee and Raphael Bostic.
In Dubai, gold rates increased, with 24-carat gold rising by AED1.00 to AED404.25. Similarly, 22-carat gold climbed by AED1.00 to AED374.50. Additionally, 21-carat gold gained AED1.25, reaching AED359.00, while 18-carat gold rose by AED0.75 to AED307.75.
The U.S. Consumer Price Index (CPI) met expectations, rising 2.7 percent on a yearly basis in July, as reported by the U.S. Bureau of Labor Statistics (BLS) on Tuesday. The annual core CPI increased by 3.1 percent in July, compared to the 2.9 percent rise recorded in June and exceeding the market consensus of 3 percent. On a monthly basis, the CPI and core CPI rose by 0.2 percent and 0.3 percent, respectively, outperforming estimates.
Traders raised the implied probability for a Fed September rate move following the CPI release and also assessed the chances of another reduction in October at about 67 percent, up from 55 percent the day before, according to the CME FedWatch tool. Increasing expectations of Fed rate cuts could exert downward pressure on the Greenback and support the USD-denominated commodity price. Lower interest rates might diminish the opportunity cost of holding gold, bolstering the appeal of the non-yielding yellow metal.
Awaiting economic signals
Progress on the trade front might limit the upside potential for the yellow metal, which is traditionally viewed as a safe-haven asset. U.S. President Donald Trump on Monday agreed to postpone implementing sweeping tariffs on China, extending the timeline by another 90 days just hours before the last agreement between the world’s two largest economies was set to expire.
Federal Reserve officials, including individuals like Jeff Schmid, have recently articulated a cautious position on maintaining current interest rates due to ongoing economic momentum and inflation levels exceeding targets. However, they remain receptive to policy adjustments if demand growth weakens significantly. The Fed has kept interest rates steady during its previous meetings this year, awaiting clearer signals—while the U.S. CPI data has bolstered market pricing for a possible rate cut in September, it is not yet a certainty. The Fed’s gradual approach to monetary policy amid moderating inflation and a cooling labor market supports a favorable environment for gold, as rate cuts would lower the opportunity cost of holding non-yielding bullion.
Gold prices edged up on Tuesday following a significant drop in the prior session, as investors anticipated U.S. inflation data that could provide further clarity on the Federal Reserve’s rate-cut intentions.
Presidential assurance on gold
Bullion markets breathed a sigh of relief after U.S. President Donald Trump announced that gold imports would not be subjected to tariffs, effectively putting an end to days of uncertainty that had unsettled global markets. This announcement came in response to confusion created by a U.S. Customs and Border Protection letter suggesting that standard gold bars of one kilogram and 100 ounces—a crucial format for bullion trade, particularly from Switzerland—might be liable for reciprocal tariffs as high as 39 percent. The potential for these tariffs had driven gold futures to record highs, as fears escalated over disrupted global supply chains and increased costs for bullion traders.
Trump addressed the matter directly in a statement on his social media platform, Truth Social, asserting, “Gold will not be Tariffed!” although he did not provide further details. The White House later confirmed that it was drafting an executive order to clarify misinformation regarding tariffs on gold bars and other specialty products. This presidential intervention calmed market turmoil and alleviated concerns about trade barriers on gold, an essential investment metal for many central banks and investors seeking protection against inflation.
In the aftermath of the announcement, gold futures prices retreated from their peaks, with market focus shifting back to economic indicators such as U.S. inflation data and signals from the Federal Reserve. Analysts noted that the removal of tariff uncertainty allowed the market to adjust more comfortably to interest rate expectations rather than trade risks. This resolution was deemed critical, as a tariff on gold—particularly on Swiss-imported bullion bars, which dominate U.S. imports—could have had “incalculable” negative consequences for global bullion markets and supply chains.
