Gold prices saw another decline on Wednesday as the U.S. dollar strengthened ahead of the release of key U.S. inflation data which could provide investors with further insights into possible Federal Reserve interest rate cuts.
In the UAE, gold prices saw a marginal dip with 24-carat gold falling to AED280 per gram, while 22-carat gold decreased to AED259.25. Twenty-one-carat gold and 18-carat gold remained stable at AED251 and AED215.25, respectively.
Globally, spot gold saw a 0.09 percent decline to $2,312.98 per ounce, as of 5:18 GMT. Meanwhile, U.S. gold futures rose 0.12 percent to $2,329.35.
In addition, the U.S. dollar index rose 0.06 percent on Wednesday, while benchmark U.S. 10-year Treasury yields saw a slight 0.002 percent decline.
U.S. inflation to impact Fed’s projections
Gold prices have lost 1.71 percent in the last month as uncertainty over the Fed’s next move impacted investor sentiment. The stronger-than-expected non-farm payrolls data last week placed gold on a downward trajectory following its 3.5 percent loss on Friday.
Traders have adopted a wait-and-see approach ahead of the release of the U.S. consumer price index, which will give further insights into the progress on inflation. In addition, the Federal Open Market Committee (FOMC) will conclude its two-day meeting today and reveal its latest monetary policy decision and projections for the U.S. economy.
Following the meeting, markets will closely watch Fed chair Jerome Powell’s monetary policy statement and projections, which include the Fed’s dot plot that indicates the possible path for future monetary policy. Lower interest rates reduce the opportunity cost of holding non-yielding bullion, further supporting demand for gold which could lead to an increase in the metal’s prices.
Asia demand surges
Gold demand in Asia has surged despite prices remaining high as buyers turn to bullion as a hedge against geopolitical and economic uncertainty. In China, investors are grappling with currency devaluation, a real estate downturn and trade tensions, which have raised gold’s appeal as a safe investment. China’s purchases of gold coins and bars surged 27 percent during the first quarter of this year.
The rise in demand was also evident in Japan, Thailand and Vietnam. However, investors in India and Australia remain sensitive to high prices.
Read: Five key themes that will shape global economy in 2024
Other precious metals
Despite the decline in gold prices, other precious metals saw gains on Wednesday with spot silver rising 0.39 percent to $29.37. In addition, platinum saw a 0.75 percent increase to $958.65 while palladium gained 1.15 percent to $894.21.
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