Gold prices rose on Thursday after losing 1 percent in the previous session after data revealed that U.S. inflation rebounded in July, fading hopes for a larger interest rate cut from the Federal Reserve next month.
In the UAE, gold prices lost AED2.5 with 24-carat gold inching down to AED297 while 22-carat gold declined to AED275. Meanwhile, 21-carat gold reached AED266.25 and 18-carat gold reached AED228.25.
Globally, spot gold rose 0.14 percent to $2,452.95, as of 5:08 GMT, partially recovering the 1 percent dip to $2,440.47 in the previous session. Meanwhile, U.S. gold futures inched up 0.45 percent to $2,490.85.
Smaller September rate cut
Gold prices recovered after declining on fading investor hopes for a larger 50-basis-point rate cut in September. For now, the data has prompted markets to price in a greater chance of a 25-basis-point rate cut.
The U.S. consumer price index rose 0.2 percent in July after falling 0.1 percent in June, the Department of Labor’s Bureau of Labor Statistics said. In the 12 months through July, the CPI increased 2.9 percent after rising 3 percent in June.
Markets are now pricing in a 36 percent chance of a 50-basis point rate cut by the Fed in September, down from 50 percent before the release of the U.S. CPI data, according to the CME FedWatch Tool. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold.
A smaller rate cut may impact gold prices and take away momentum from the gold market to other investments.
So far this year, gold prices have gained 19 percent and set a new record high of $2,483.60 on July 17 on greater safe-haven demand and Fed rate cut expectations.
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Other precious metals
The precious metals market witnessed a recovery today as gold prices increased with spot silver rising 0.49 percent to $27.73. Platinum gained 1.35 percent to $931.90 while palladium rose 0.15 percent to $936.75.
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