Gold prices rose to an all-time high on Wednesday as hopes for a U.S. interest rate cut in September rose after recent comments from Federal Reserve officials.
In the UAE, gold prices rose AED3.50 with 24-carat gold inching up to AED299 per gram, while 22-carat gold rose to AED276.75. Twenty-one-carat gold reached AED268 while 18-carat gold reached AED229.75.
Globally, spot gold declined 0.10 percent to $2,466.06, as of 5:08 GMT, after hitting a record high of $2,482.29. Meanwhile, U.S. gold futures increased 0.13 percent to $2,471.10.
U.S. rate cuts fuel gold rally
Gold prices hit a record high as investors await a lower interest rate environment. Traders now eye the $2,500 level as the next target. However, if the current rally continues prices could surge above that level by the end of the year.
Markets are pricing in a rate cut of at least 25 basis points by the Fed at the September meeting. Lower interest rates tend to reduce the opportunity cost of holding non-yielding assets like gold.
Fed Chair Jerome Powell said on Monday that the most recent inflation readings add confidence that the pace of price increases is returning to the Fed’s target sustainably, suggesting that an interest rate cut may occur soon.
Meanwhile, Fed Governor Adriana Kugler said on Tuesday that there is cautious optimism that inflation is returning to the U.S. central bank’s 2 percent target.
The top gold consumer, China, will likely continue making official gold purchases despite pausing in May and June. Hence, its bullion holdings remain low as a share of reserves as geopolitical tensions persist.
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Other precious metals
Amid the rise of gold prices to a new record, the precious metals market witnessed mixed movement. Spot silver declined 0.92 percent to $31.09 while palladium rose 0.77 percent to $966.54. Copper gained 0.20 percent to $4.45 while platinum declined 0.10 percent to $998.89.
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