Gold prices hovered below their record highs on Tuesday after the U.S. Federal Reserve chair signaled a smaller second interest rate cut this year as investors awaited labor market data for further insights into the economy’s trajectory.
In the UAE, gold rates edged down AED2 with 24-carat gold declining to AED319.50 and 22-carat gold falling to AED296. Meanwhile, 21-carat gold reached AED286.50 and 18-carat gold was at AED245.50.
Globally, spot gold gained 0.22 percent to $2,641.13 as of 5:13 GMT, after hitting another record high of $2,685.42 last week. Meanwhile, U.S. gold futures rose 0.12 percent to $2,662.70.
The dollar index continued its rise, gaining o.o1 percent to 100.79, making gold more expensive for other currency holders.
Powell hints smaller rate cut
Gold prices retreated from their record high as Fed chair Jerome Powell suggested on Monday that the central bank will likely pursue quarter-percentage-point interest rate cuts moving forward. Powell noted that the Fed was not “in a hurry” after new data boosted confidence in ongoing economic growth and consumer spending.
The central bank now awaits further economic data before making any changes to the monetary policy, meaning that gold prices and rate cut expectations will likely become more sensitive to data releases. Weaker-than-expected U.S. labor market data could raise bets for a larger cut, which will likely support gold prices further.
This week, investors await the release of the U.S. ADP employment data and nonfarm payrolls, which will provide additional insight into the health of the economy. Speeches from several Fed officials in addition to U.S. job openings data are also expected later in the day.
Markets are now pricing a 64 percent chance of a 25-basis-point rate cut in November, according to the CME FedWatch tool.
Mideast tensions persist
Tensions between Israel and Lebanon continued to escalate, raising fears of a regional conflict, which provided additional support to gold prices. Geopolitical tensions and a lower interest rate environment tend to boost non-yielding assets like gold.
Amid the uncertain global economic and geopolitical landscape, bullion posted its best quarterly gain since 2016 on Monday after the Fed kicked off its interest rate-cutting cycle with a half-percentage point reduction in the September meeting.
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Other precious metals
The precious metals market saw mixed movement as gold prices retreated from their all-time high. Spot silver rose 0.61 percent to $31.34 while platinum gained 0.78 percent to $983.75. However, palladium inched down 0.13 percent to $998.31 and copper fell 0.08 percent to $4.49.
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