Gold takes heart from rate cut expectations

Bengaluru — Gold prices ticked higher on Monday, as the expectation that the Federal Reserve will start cutting interest rates later in the year and tension in the Middle East lifted bullion’s appeal.

Spot gold rose 0.3% to $2,309.24/oz by 4.27am GMT. US gold futures gained 0.5% to $2,318.80/oz.

“Investors will look at the political situation in the Middle East and how the ongoing negotiations for a ceasefire play out. If the hopes of a truce become lesser, gold will gain,” said Kelvin Wong, a senior market analyst for Asia Pacific at Oanda.

Prospects for a Gaza ceasefire appeared slim on Sunday as Hamas reiterated its demand for an end to the war in exchange for the freeing of hostages, and Israeli Prime Minister Benjamin Netanyahu flatly ruled that out.

“Weaker US data offers more policy flexibility for the Fed in terms of rate cuts,” paving way for gold prices to stabilise, said IG market strategist Yeap Jun Rong.

Data on Friday showed that US job growth slowed more than expected in April, reinforcing expectations that the Fed will start cutting rates later this year.

Markets are pricing in a 67% chance of a US rate cut in September, as per CME’s FedWatch Tool. Lower interest rates reduce the opportunity cost of holding bullion.

New York Fed Bank president John Williams said on Friday that the 2% target for inflation is “critical” to the Fed’s efforts to achieve price stability, while Austan Goolsbee, president of the Chicago Fed, noted that the US rate-path “dot plot” needs more context.

Meanwhile, the Perth Mint’s gold product sales in April jumped two-fold from a month earlier, while silver sales fell to their lowest since December.

Among other precious metals, spot silver was up 1.3% to $26.89/oz. Platinum lost nearly 0.7% to $948.97 and palladium inched up 0.1% to $946.58.

Reuters