U.S. dollar and Treasury yields remain firm, dimming expectations for June interest rate cuts
Gold prices in the UAE inched higher after hitting their record high on Tuesday, with 24-carat gold at AED273.25 per gram.
Twenty-two-carat gold climbed to AED253 per gram while 21-carat gold was at AED245 per gram. Eighteen-carat gold also gained to AED210.
Globally, gold prices hovered below the record high of $2,265.49. Spot gold saw a 0.17 percent increase to $2,255.16. Meanwhile, U.S. gold futures gained 0.83 percent to $2,275.85.
This comes as the U.S. dollar and Treasury yields maintained their strength following robust U.S. economic data, sparking uncertainties about the Federal Reserve‘s intentions regarding interest rate adjustments. Analysts noted that while gold prices reached a new record, overbought conditions led to a mild pullback. However, they explained that such pullbacks have been shallow, with potential buyers waiting for better entry points.
Factors limiting gold’s gains
Despite gold prices’ upward trajectory, their gains were constrained by the strength of the U.S. dollar, which hovered near a 4.5-month high. Additionally, benchmark U.S. 10-year Treasury yields were trading close to their highest levels in two weeks. This trend emerged following the release of data indicating growth in U.S. manufacturing for the first time in 1.5 years in March. Consequently, traders reduced their expectations of a June interest rate cut to 63 percent, according to the CME Group’s FedWatch Tool.
Fed’s stance
Federal Reserve chairperson Jerome Powell’s remarks on Friday suggested that the latest U.S. inflation data did not impact the central bank’s outlook. Powell emphasized that with the economy showing strength, there was no urgency to implement rate cuts.
Market participants are closely monitoring Friday’s release of the U.S. nonfarm payrolls report. Hence, a strong jobs report could potentially trigger a pullback in gold prices. Historically, gold tends to benefit from interest rate cuts as they reduce the opportunity cost of holding bullion.
Read: Dubai Financial Market sees 103 percent surge in investor accounts in Q1 2024
Other precious metals
While gold prices captured significant attention, other precious metals also experienced mixed results. Spot silver rose by 0.7 percent to $25.26 per ounce, while platinum fell slightly by 0.1 percent to $900.65. Palladium saw an increase of 1.1 percent, climbing to $1,006.84 per ounce.
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