New York, NY – July 29, 2024 – Gold prices staged a comeback in Asian trade on Monday, clawing back losses incurred throughout most of July. The shift in investor focus towards the upcoming Federal Reserve meeting fueled the rally. The central bank is expected to offer clues on potential interest rate cuts, a move seen as positive for the precious metal.
Dollar Weakness Aids Gold’s Ascent
Weakness in the US dollar further bolstered gold. Key inflation data released on Friday indicated some easing of price pressures in the United States. This scenario empowers the Fed to consider interest rate reductions, potentially lowering borrowing costs.
Spot gold climbed 0.4% to $2,395.31 per ounce, while December gold futures increased 0.5% to $2,440.35 per ounce by 00:58 ET (04:58 GMT).
Rate Cut Bets Bolster Yellow Metal
The primary driver behind gold’s resurgence was speculation of an interest rate cut. This speculation follows encouraging signs observed in the PCE price index data released last week. Notably, the PCE index is the Fed’s preferred gauge of inflation.
With the Fed meeting looming large, any signals regarding potential rate cuts will be meticulously scrutinized by investors. Markets are currently anticipating a 25-basis-point reduction in September, according to CME Fedwatch data.
Lower Rates Favor Gold
The prospect of lower interest rates aligns well with gold’s value proposition. A decrease in borrowing costs reduces the opportunity cost associated with holding gold, making it a more attractive investment alternative. High interest rates have dented gold prices over the past two years. However, increased demand for safe-haven assets propelled the precious metal to record highs during the same period.
Other Precious Metals Recover
Other precious metals also exhibited firmness on Monday, recouping some of their recent losses. Platinum futures gained 0.8% to $953.35 per ounce, while silver futures rose 0.8% to $28.242 per ounce.
Copper Rebounds After Steeper Losses
Among industrial metals, copper prices displayed a modest recovery on Monday, following significant losses over the past month. Benchmark copper futures on the London Metal Exchange advanced 0.2% to $9,130.50 per tonne, while one-month copper futures edged up 0.4% to $4.1303 per pound.
Focus on China’s Cues
Copper prices have been under pressure due to mounting concerns surrounding China, the world’s top copper importer. Weak economic signals and an absence of clarity on further stimulus measures have dampened investor sentiment. The focus this week will shift to key purchasing managers index data from China, which will provide further insights into the nation’s business activity.
