Gold prices rose on Thursday as traders highly anticipated a U.S. interest rate cut from the Federal Reserve in September, which supported demand for non-yielding assets like gold.
In the UAE, gold prices rose AED1.25 with 24-carat gold inching up to AED298.50 per gram, while 22-carat gold rose to AED276.25. Twenty-one-carat gold reached AED267.50 while 18-carat gold reached AED229.25.
Globally, spot gold rose 0.24 percent to $2,467.3, as of 5:14 GMT, after hitting a record high of $2,482.29 in the previous session. Meanwhile, U.S. gold futures increased 0.44 percent to $2,470.80.
Declining inflation to loosen monetary policy
Gold prices rose as more Fed officials signaled a rising likelihood of a rate cut soon. Fed Governor Christopher Waller and New York Fed President John Williams both noted that the path toward looser monetary policy has become shorter. In addition, Richmond Fed President Thomas Barkin said he is “very encouraged” by greater declines in inflation.
Lower interest rates and U.S. elections are the two main factors likely to push gold prices above $2,500 as gold traditionally benefits from economic and geopolitical uncertainty.
Besides, holdings of gold in ETFs bottomed in May but they are now starting to increase again. This signals renewed demand for gold from ETFs.
Lower interest rates increase the appeal of holding non-yielding assets like gold. The market now expects a 25-basis-point decline in interest rates at the Federal Reserve’s September meeting, according to CME’s FedWatch Tool.
Read: Oil prices rise amid declining U.S. crude inventories, Fed rate cut expectations
Other precious metals
Amid the rise in gold prices, spot silver rose 0.27 percent to $30.38 while palladium rose 0.57 percent to $957.27. Copper declined 0.01 percent to $4.40 while platinum rose 0.57 percent to $998.95.
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