Gold Price Today: Gold prices gained more than 1 per cent on Monday (July 27) as easing inflation concerns, falling crude oil prices and expectations of a less aggressive interest rate outlook supported demand for the precious metal.
Spot gold prices jumped 1.4 per cent, rising by around USD 56 to trade at USD 4,108.44 per ounce as of 6:35 am IST, putting bullion on track for its second consecutive session of gains. Silver prices also strengthened, with spot silver trading more than 2.5 per cent higher at USD 59.71 per ounce.
The latest rise in gold prices was driven by a combination of lower oil prices, a weaker US dollar and expectations that central banks may adopt a less aggressive approach towards interest rates.
Falling crude oil prices ease inflation worries
One of the key reasons behind the rise in gold prices is the decline in crude oil prices. Brent crude futures slipped nearly 4 per cent to USD 88.03 per barrel, falling below the USD 90 mark.
The decline came after a reduction in geopolitical risk premium following signs of de-escalation in the US-Iran conflict. The US has not launched fresh strikes on Iran since late Friday after 13 days of military action, reducing concerns about further escalation.
Lower oil prices can help reduce inflationary pressure because energy costs play a major role in consumer prices. A softer inflation outlook can reduce the possibility of aggressive interest rate hikes, creating a favourable environment for non-yielding assets like gold.
Rate hike uncertainty supports bullion demand
Gold prices also received support from changing expectations around US interest rates.
Markets are closely watching the upcoming Federal Open Market Committee (FOMC) meeting, with investors assessing the possibility of further rate increases. Current expectations suggest around a 35 per cent probability of a rate hike in the upcoming FOMC decision, while the probability of a hike in the September meeting remains around 80 per cent.
Higher interest rates generally pressure gold prices because they increase the appeal of interest-bearing assets such as bonds. However, expectations of a slower pace of monetary tightening tend to support gold demand.
Weak US dollar boosts gold prices
Another factor supporting gold prices is the decline in the US dollar. The US dollar index, which measures the greenback against a basket of six major currencies, was trading 0.3 per cent lower at 101.20.
A weaker dollar makes gold cheaper for buyers holding other currencies, increasing demand for the precious metal in international markets.
Gold and silver prices in the domestic market were not trading at the time of writing. In the previous session, gold futures settled 0.2 per cent higher at Rs 143,066, while silver futures ended 1.3 per cent higher at Rs 222,301.
What will impact gold prices ahead?
Market focus will now shift towards a series of key US economic data releases due this week. Investors will closely track the FOMC interest rate decision scheduled for Wednesday, which could provide further clues about the outlook for the world’s largest economy.
Inflation data due later this week will also be closely watched, as any signs of easing price pressures could further influence expectations around US monetary policy and impact gold prices.
(Disclaimer: The above article is meant for informational purposes only and should not be considered as any investment advice. ET NOW DIGITAL suggests its readers/audience to consult their financial advisors before making any money-related decisions.)
