Gold prices rebounded on Tuesday as increased geopolitical uncertainty in the Middle East prompted investors to turn to safe-haven assets.
In Dubai, gold rates exhibited slight fluctuations, with 24-carat gold reaching AED406.5, while 22-carat gold was priced at AED373.1. Additionally, 21-carat gold was valued at AED356.4, and 18-carat gold stood at AED306.4.
Spot gold increased by 0.4 percent, settling at $3,396.67 an ounce as of 02:39 GMT, following a decline of more than 1 percent on Monday. Currently, spot gold is trading above $3,389.
U.S. gold futures remained steady at $3,416.30 (presently trading above $3,405).
“Market sentiment continues to swing between escalation and de-escalation regarding events in the Middle East, and these back-and-forth sentiment shifts are what is driving the gold price’s moves either side of the $3,400 level,” Reuters reported, citing KCM Trade Chief Market Analyst Tim Waterer.
Fed meeting anticipation
Gold is widely regarded as a safe-haven asset during periods of geopolitical and economic instability.
Investors are also anticipating the U.S. Federal Reserve meeting scheduled to commence later in the day, with a decision expected on Wednesday.
The Fed is projected to maintain rates at their current levels. However, attention will once again be on the trajectory that Chair Jerome Powell outlines for potential future rate cuts. Traders are presently factoring in two rate cuts by the end of this year.
In other markets, spot silver increased by 0.3 percent to $36.41 per ounce, platinum rose by 0.6 percent to $1,251.20, while palladium edged up by 0.2 percent to $1,031.68.
Vijay Valecha, chief investment officer at Century Financial, stated to Economy Middle East, “The Federal Reserve is widely expected to maintain the federal funds target range at 4.25 percent–4.50 percent during the June FOMC meeting, marking the seventh consecutive hold since December. According to the CME FedWatch Tool, there is a 99.8 percent implied probability that the Fed will remain on pause this week, reinforcing the consensus around a cautious, data-dependent policy stance.”
Valecha noted that while no changes are anticipated at this meeting, financial markets are increasingly factoring in the first rate cut by September. Bond futures traders estimate about a 66 percent likelihood of a cut occurring then, based on data from the CME FedWatch Tool, while they predict a 94 percent chance that the Fed will implement at least two cuts by year-end. This shift in expectations reflects a growing confidence that inflation is cooling sustainably alongside a resilient yet moderating labor market.
“Right now, monthly government data indicates that inflation is easing while the labor market remains relatively robust. The CPI report released Wednesday showed slower price growth than economists had anticipated for May, and the employment data for May revealed strong job creation within the US economy. Chair Powell is expected to reaffirm the Fed’s wait-and-see approach, highlighting the necessity for sustained evidence of easing inflation while ensuring that policy remains restrictive enough to bring inflation to target without jeopardizing the labor market.”
