Rate cut hopes put gold on track for monthly gain

Bengaluru — Gold prices firmed on Wednesday, heading for a monthly gain on the back of growing optimism about US interest rate cuts and the killing of Hamas leader Ismail Haniyeh in Iran, while traders shifted focus to the Federal Reserve’s policy verdict.

Spot gold was up 0.4% at $2,416.79/oz by 4.01am GMT, and has gained nearly 4% for the month. US gold futures added 0.5% to $2,414.80.

The killing of Hamas leader Haniyeh, revealed by the Palestinian militant group and Iran’s elite Revolutionary Guards, was prompting some safe-haven demand for gold, said Kyle Rodda, a financial market analyst at Capital.com.

As markets tried to gauge the implications of the killing, prices would benefit further if there was significant escalation in tension, Rodda said.

Bullion, traditionally known for its stability as a favoured hedge against geopolitical and economic risks, thrives in a low-interest rate environment.

At the conclusion of the Fed’s two-day meeting later on Wednesday, the expectation is that the US central bank will hold rates steady and policymakers will lay the groundwork for a September rate cut.

“The market wants to hear a confirmation that a September cut is on the cards and it will be the beginning of a policy easing cycle. Gold will rally if the Fed language indicates that multiple cuts are coming,” said Rodda.

Traders will also keep an eye on the ADP employment report due later in the day and Friday’s US payrolls report.

Spot silver rose 0.7% at $28.60/oz on Wednesday.

Platinum gained 1% to $968.80 and palladium edged 1.3% higher to $900.21. However, both the metals headed for monthly decline.

Elsewhere, key metals consumer China’s manufacturing activity in July shrank, keeping alive the expectation that Beijing will need to launch more stimulus as a protracted property crisis and job insecurity weigh on growth.

Reuters