Gold prices declined slightly on Tuesday as traders looked toward more U.S. economic data this week after recent data revealed that inflation has stabilized, which raised hopes for an interest rate cut from the Federal Reserve before the end of the year.
In the UAE, gold prices gained AED2 with 24-carat gold rising to AED284.50 per gram, while 22-carat gold increased to AED263.50. Twenty-one-carat gold inched up to AED255.00, while 18-carat gold reached AED218.50.
Globally, spot gold saw a modest 0.08 percent decline to $2,348.88 per ounce, as of 5:07 GMT. Despite the recent declining trajectory, gold prices gained 1.05 percent in the last month. Meanwhile, U.S. gold futures saw a 0.01 percent increase to $2,369.45.
The U.S. dollar index declined by 0.08 percent against a basket of currencies, making gold more attractive for foreign currency holders, despite the subtle decline in prices.
U.S. economic data
Recent data revealed that U.S. manufacturing activity slowed for the second month in a row in May. Meanwhile, U.S. construction spending fell unexpectedly for a second consecutive month in April due to a decline in non-residential activity.
The upcoming jobs data acts as a catalyst for gold prices. Signs of decline in jobs data could support gold prices in the short term. Upcoming data releases also include the ADP employment report on Wednesday and the non-farm payrolls data due on Friday. This data will provide more insights into the health of the U.S. economy and the Fed’s policy rate stance.
Gold prices saw some support in the previous sessions following the softer-than-expected personal consumption expenditures (PCE) data, which supported investors’ hopes of an interest rate cut this year. Hence, the data revealed that inflation had stabilized in April, rising by 0.3 percent, similar to the increase in March. This raised hopes for an interest rate cut in September to a 60 percent chance, according to CME FedWatch tool. Gold is traditionally an inflation hedge. However, higher interest rates increase the opportunity cost of holding non-yielding assets.
Other precious metals
In addition to the decline in gold prices, spot silver saw a 0.43 percent decline to $30.63. Meanwhile, spot palladium saw a 0.56 percent increase to $922.75 while platinum rose 0.37 percent to $1,015.24.
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