Gold prices rose on Tuesday after comments from U.S. Federal Reserve officials raised hopes for a bigger interest rate cut this year.
In the UAE, gold prices declined by AED1.5 with 24-carat gold inching down to AED291.75 while 22-carat gold declined to AED270. Meanwhile, 21-carat gold reached AED261.50 and 18-carat gold reached AED224.
Globally, spot gold rose 0.21 percent to $2,409.59, as of 5:11 GMT. Meanwhile, U.S. gold futures gained 0.26 percent to $2,450.80.
Recession fears prompt rate cut push
Gold prices rose as U.S. central bank policymakers pushed back against fears of a recession but warned that the Fed will need to start cutting rates to avoid an economic freefall. San Francisco Fed President Mary Daly said her mind was open to cutting interest rates as necessary and policy needed to be proactive.
Analysts said that if upcoming U.S. economic data reveals weakness and the Fed becomes even more dovish, gold prices will likely rise over $2,500. Investors will also await data from top gold consumer China for more insight into the global economic landscape. With geopolitical tensions on the rise in the Middle East, safe-haven demand for gold should persist.
Traders are now pricing in a total 110 basis point rate cut this year from the Fed, with over a 70 percent chance of a 50 basis point cut in September. Lower interest rates reduce the opportunity cost of holding non-yielding assets like gold.
Japanese stock market recovers
Gold prices recovered from the previous session’s dip as the Japanese stocks opened higher, signaling a recovery across the Asian share markets. Japanese stocks rebounded sharply on Tuesday after their biggest single-day decline since the 1987 Black Monday sell-off in the previous session. The Nikkei index rose 7.87 percent to 33,933.44, while the broader Topix index was up 7.54 percent to 2,395.18.
Data on Monday revealed that the U.S. services sector activity rebounded from a four-year low in July amid a rise in orders and employment.
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Other precious metals
The precious metals market saw mixed movement as gold prices rose. Spot silver declined 0.16 percent to $27.23 while platinum rose 1 percent to $915.55. In addition, palladium gained 0.83 percent to $856.75 after hitting its lowest levels since August 2018 on Monday. Meanwhile, copper declined 0.03 percent to $3.98.
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