Gold prices declined on Monday as Chinese and Asian demand fell in light of slowing economic growth. The yellow metal gained ground last week as U.S. inflation data bolstered hope of an interest rate cut by the Federal Reserve in September.
In the UAE, gold prices edged up AED0.75 with 24-carat gold rising to AED289.75 while 22-carat gold increased to AED268.25. Meanwhile, 21-carat gold reached AED259.75 and 18-carat gold reached AED222.75.
Globally, spot gold declined 0.05 percent to $2,395.18, as of 5:16 GMT. Meanwhile, U.S. gold futures gained 0.54 percent to $2,441.10.
Asian demand dips
Gold prices declined as the sluggish Chinese economy and lower buying interest from China’s central bank impacted the upside for gold. Notably, China is the largest producer and consumer of gold worldwide. Analysts said that gold prices will likely continue to face pressure from the fall in Asian demand.
Fed’s Wednesday rate decision
Gold prices inched up late last week amid rising hopes for an interest rate cut by the Federal Reserve in September following the release of U.S. inflation data. Investors will closely watch the Fed’s interest rate decision on Wednesday, with no change in rate expected.
The data revealing progress on inflation has triggered expectations that the Fed would start easing monetary policy in September. This traditionally supports gold prices as lower interest rates generally reduce the opportunity cost of holding non-yielding assets.
Analysts said that the mixed-to-weaker U.S. inflation data on Friday indicated inflationary pressures and economic activity are easing, paving the way for two potential rate cuts this year.
U.S. inflation data
The personal consumption expenditures (PCE) price index rose 0.1 percent monthly and 2.5 percent annually in June, in line with the market consensus, according to the Department of Commerce. The year-over-year gain in May recorded 2.6 percent, while the monthly figure was unchanged. Meanwhile, core PCE inflation rose to 0.2 percent month-on-month from 0.1 percent in May. The annual core PCE rose to 2.6 percent in the same period, compared to 2.5 percent in May.
Both figures matched market expectations. Therefore, investors are now pricing in a nearly 90 percent chance of a Fed rate cut in September, followed by another cut in November and December, according to the CME FedWatch Tool.
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Other precious metals
Despite the decline in gold prices, spot silver rose 0.63 percent to $28.07. Palladium rose 0.87 percent to $907.92 while platinum gained 0.64 percent to $941.47. However, copper declined 0.01 percent to $4.10.
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