Gold prices rose on Wednesday as investors awaited key U.S. inflation data for more insight into the Federal Reserve‘s interest rate trajectory.
In the UAE, gold prices saw an AED0.75 increase with 24-carat gold inching up to AED286.75 per gram, while 22-carat gold rose to AED265.50. Twenty-one-carat gold reached AED257 while 18-carat gold reached AED220.25.
Globally, spot gold gained 0.13 percent to $2,368.31, as of 5:14 GMT. Meanwhile, U.S. gold futures rose 0.29 percent to $2,374.80.
The dollar index declined 0.04 percent to 105.08.
Slower inflation data to raise rate cut hopes
Gold prices rose after Fed chair Jerome Powell said that inflation has been improving in the last few months, in his testimony to the senate. Powell added that more good data would strengthen the case for cutting interest rates. Powell will next speak before the House later in the day.
The recent decline in inflation has raised hopes for a rate cut in September. However, Powell expressed the Fed’s need for more positive data, including progress on inflation towards the central bank target. This would offer policymakers more confidence to alter the policy rate.
Traders are currently pricing in a 73 percent chance of an interest rate cut in September, according to CME’s FedWatch Tool. Lower interest rates raise the appeal of non-yielding assets like gold.
June CPI data
Amid the rise in gold prices, markets expect the June consumer price index (CPI) data, due on Thursday, to show that headline prices rose 0.1 percent in June, while core prices rose 0.2 percent. This would place annual gains at 3.1 percent and 3.4 percent, respectively.
Analysts believe that if inflation rises in June, the Fed would have reason to delay any policy easing. This may pressure gold prices down to the $2,300 mark.
Read: 10 AI stocks you can add to your investment portfolio
Gold ETFs
Global physically backed gold exchange-traded funds (ETFs) saw inflows in June for the second month straight due to additions to holdings by Europe and Asia-listed funds, the World Gold Council said on Tuesday.
Other precious metals
Despite the rise in gold prices, spot silver declined 0.03 percent to $30.78 while palladium lost 0.38 percent to $976.50. Copper declined 0.27 percent to $4.57, however, platinum inched up 0.03 percent to $984.55.
For more markets news, click here.
