Gold prices declined on Friday but were set for their third consecutive week of gains after data revealed that U.S. inflation was declining, raising hopes that the Federal Reserve will likely start cutting interest rates in September.
In the UAE, gold prices saw an AED3.25 increase with 24-carat gold inching up to AED291.75 per gram, while 22-carat gold rose to AED270. Twenty-one-carat gold reached AED261.50 while 18-carat gold reached AED224.
Globally, spot gold declined 0.29 percent to $2,408.63, as of 5:09 GMT. Meanwhile, U.S. gold futures declined 0.34 percent to $2,413.55.
The dollar index rose 0.03 percent to 104.47.
U.S. inflation eases
Gold prices surged above the $2,400 level after data on Thursday revealed that the U.S. consumer price index unexpectedly fell and the annual increase in inflation was the lowest in a year. This raised hopes for a September rate cut by the Federal Reserve.
The U.S. inflation outlook and the interest rate cut path have supported gold prices this week. As economic data signals moving into a lower interest rate environment, gold prices may set new record highs this year. Thus, lower interest rates reduce the opportunity cost of holding non-yielding assets like gold.
Traders are currently pricing in a 93 percent chance of a September rate cut, according to CME’s FedWatch Tool, compared to a 70 percent chance before the data’s release.
Markets await PPI data
Mary Daly, San Francisco Fed Bank President, said on Thursday that she expects price pressures to further ease and the labor market to warrant interest rate cuts. Meanwhile, Chicago Fed Bank President Austan Goolsbee stated the U.S. economy looks like it is back on track to the 2 percent inflation target.
Investors now await the U.S. producer price index (PPI) reading due today at 12:30 GMT.
Read: How to calculate exchange rates: A beginner’s guide
Other precious metals
Amid the decline in gold prices, spot silver lost 0.72 percent to $31.21 while palladium declined 1.16 percent to $983.29. Copper rose 0.03 percent to $4.51 while platinum declined 0.48 percent to $999.37.
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