Spot gold slipped 0.2% to $4,096.29 an ounce in early trade, while US gold futures for August delivery edged up 0.1% to $4,094.10 an ounce.
On the COMEX, gold futures were down 0.39% at $4,144.40 an ounce. COMEX silver futures also declined 0.22% to $58.89 an ounce.
Despite Friday’s (July 31’s) muted trade, gold is poised to gain more than 2.2% in July, marking its strongest monthly performance since February and its first monthly advance after four consecutive months of declines.
Why are gold prices rising?
Gold drew support after the US Federal Reserve left interest rates unchanged at its latest policy meeting. Fed Chair Kevin Warsh refrained from offering clear guidance on the timing of the central bank’s next move, prompting traders to dial back expectations of a September rate hike.
Markets are now pricing in a 63% probability of a rate hike in September, down from around 80% before the Fed’s policy decision, according to CME Group’s FedWatch Tool. Lower expectations of higher interest rates tend to support gold because the precious metal does not offer any yield.
West Asia tensions lift safe-haven demand
Geopolitical uncertainty also continued to underpin bullion prices.
A drone strike on gas vessels at Egypt’s Mediterranean port of Damietta has raised concerns that the US-Iran conflict could expand further, potentially disrupting shipping through the Suez Canal, one of the world’s most important trade and energy routes. Such developments typically increase demand for safe-haven assets such as gold.Dollar and inflation remain key drivers
The US dollar recovered about 0.3% on Friday (July 31) after suffering its biggest single-day decline since January 2023 in the previous session. A stronger dollar generally limits gains in precious metals by making them more expensive for holders of other currencies.
Meanwhile, US inflation showed further signs of easing. The Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation gauge, fell 0.1% month-on-month in June, its weakest reading since April 2020. However, analysts expect higher oil prices resulting from renewed Middle East tensions could keep inflation risks elevated in the coming months.
Global demand stays steady
The broader outlook for gold also received support after the World Gold Council reported that global gold demand remained broadly unchanged at 1,268.9 tonnes in the April-June quarter, as stronger central bank purchases offset weaker investment demand.
India, however, recorded a 6% decline in gold consumption during the quarter, weighed down by elevated prices, higher customs duty and weaker seasonal demand.
-With Reuters inputs
