Gold prices declined on Tuesday as the U.S. dollar’s recovery outweighed investor optimism regarding the Federal Reserve‘s interest rate cuts and concerns about Middle East tensions.
In the UAE, gold prices lost AED0.75 with 24-carat gold inching down to AED303.75 and 22-carat gold declining to AED281.25. Meanwhile, 21-carat gold reached AED272.25 and 18-carat gold hit AED233.25.
Globally, spot gold fell 0.30 percent to $2,508.36 as of 5:10 GMT. Gold prices have gained over 21.5 percent this year, hitting a record high of $2,531.60 on August 20. Meanwhile, U.S. gold futures declined 0.43 percent to $2,543.40.
The U.S. dollar index rose against other currencies, making gold less attractive for other currency holders.
U.S. rate cut size bets
Gold prices declined as the dollar recovered despite a September rate cut becoming more imminent. However, markets are speculating on the size of the rate cut, which again triggered a wait-and-see mode as investors awaited upcoming economic data.
Traders now see a 70 percent chance of a 25-basis-point rate cut and about a 30 percent chance of a bigger 50-basis-point reduction, according to the CME FedWatch tool. Lower interest rates tend to boost non-yielding bullion’s appeal.
San Francisco Federal Reserve President Mary Daly said a quarter-percentage point cut in borrowing costs next month was likely.
Economists expect gold prices to continue their upward trajectory, given their historical performance during past policy easing cycles and healthy central bank demand. In addition, gold’s position as a hedge against geopolitical tensions and economic uncertainties further supports prices during this time.
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Other precious metalsÂ
In line with the decline in gold prices, the precious metals market dipped on Tuesday. Spot silver fell 0.06 percent to $29.88, platinum was down 0.98 percent to $952.48, and palladium declined 0.08 percent to $957.95.
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