Gold prices on Tuesday were lingering close to a low not seen in over a week, reached during the previous session. This decline was influenced by a U.S.-China agreement to temporarily suspend reciprocal tariffs, which increased risk appetite and reduced gold’s appeal as a safe haven.
In Dubai, gold rates saw a significant rise, with 24-carat gold gaining AED6.25 to reach AED395.25, and 22-carat gold increasing by AED6.00 to AED366. Additionally, 21-carat gold rose AED5.25 to AED350.75, while 18-carat gold saw an increase of AED5.00, bringing its price to AED300.75.
As of 03:09 GMT, spot gold remained steady at $3,230.99 an ounce, after recording a 2.7 percent decline in the previous session. It is currently trading at $3,241.
U.S. gold futures increased by 0.2 percent, hitting $3,235.20, and are currently trading at over $3,250.
Following two days of negotiations in Geneva, the U.S. and China announced tariff reductions for the next three months. U.S. tariffs on Chinese imports will drop from 145 percent to 30 percent, while Chinese duties on U.S. imports will fall from 125 percent to 10 percent, resulting in a surge in global shares.
U.S.-China tariff reductions boost markets
Last month, the U.S. and China imposed reciprocal tariffs on one another, igniting a trade war. “The prospect of better trade relations between the world’s two largest economies has caused a pick-up in risk appetite and a pullback in safe haven demand,” reported Reuters, citing KCM Trade Chief Market Analyst Tim Waterer. However, Waterer noted, “the consolidation move in the dollar has allowed the gold price to make a mild push higher.”
Federal Reserve Governor Adriana Kugler stated that the pause on import levies decreases the likelihood that the U.S. central bank will need to lower interest rates in response to an economic slowdown.
Read more: Dubai 24-carat gold prices fall AED4.5, global rates dip on positive U.S.-China talks
Fed’s interest rate outlook remains stable
Traders are eagerly anticipating the release of the U.S. Consumer Price Index (CPI) report, which is scheduled for later today. This report is expected to provide crucial insights into inflation trends and overall economic conditions, serving as a key indicator for the Federal Reserve’s future monetary policy decisions. Analysts and investors are keen to see how current inflation rates align with the Fed’s targets, as these figures will greatly influence the central bank’s approach to interest rates in the coming months.
The market is currently forecasting a 55-basis-point rate cut by the Federal Reserve this year, with expectations that this reduction will begin as early as September. Such a move could signal the Fed’s commitment to stimulating economic growth in response to any signs of economic slowdown or persistent inflationary pressures. A lower interest rate environment is typically seen as favorable for gold and other precious metals, as it can enhance their appeal as alternative investments. As traders digest the upcoming CPI data, they are likely to adjust their strategies accordingly, keeping a close eye on the Fed’s next steps and any potential implications for market dynamics.
Upcoming CPI report could influence policy
Gold, traditionally viewed as a safe-haven asset during periods of political and economic uncertainty, tends to perform well in a low-interest-rate environment. “I still think buyers will be tempted on pullbacks in gold given that economic and geopolitical risks haven’t completely disappeared,” Waterer commented.
Meanwhile, Citi projected that short-term consolidation will continue in the $3,000 to $3,300 range and downgraded the 0-to-3 month price target to $3,150. Spot silver increased by 0.6 percent to $32.78 an ounce, platinum rose by 0.8 percent to $982.70, while palladium fell by 0.4 percent to $942.19.
