Gold Prices Rise in Asian Trade, Buoyed by Fed Rate Cut Expectations

Gold prices climbed in Asian trade on Monday, regaining some of the ground lost throughout most of July. This recovery is largely attributed to growing expectations of interest rate cuts by the Federal Reserve, as well as a weaker dollar following recent U.S. inflation data.

Spot and Futures Prices

• Spot gold increased by 0.4% to $2,395.31 per ounce.
• Gold futures for December delivery rose by 0.5% to $2,440.35 per ounce by 00:58 ET (04:58 GMT).

Drivers of Gold’s Gains

The gains in gold prices are primarily driven by speculation of upcoming interest rate cuts. This sentiment has been bolstered by recent data from the Personal Consumption Expenditures (PCE) price index, which indicated a cooling of inflation pressures in the U.S. As the PCE is the Fed’s preferred measure of inflation, the data has increased market expectations that the Fed will lower rates.

The Federal Reserve’s meeting this week is anticipated to maintain current rates, but market participants are closely watching for any indications regarding potential rate cuts in the near future. According to the CME FedWatch Tool, there is a high probability of a 25 basis point rate cut in September.

Impact of Rate Cuts on Gold

Lower interest rates generally benefit gold prices as they reduce the opportunity cost of holding non-yielding assets like gold. While high interest rates over the past two years have pressured gold prices, the metal has still found support due to its appeal as a safe-haven asset.

Other Precious Metals

Other precious metals also saw gains:

• Platinum futures rose by 0.8% to $953.35 per ounce.
• Silver futures increased by 0.8% to $28.242 per ounce.

These metals are similarly benefiting from the broader market’s focus on potential monetary easing by the Federal Reserve.