Gold prices pulled back slightly on Monday but remained near a more than one-month high reached in the previous session, following weaker U.S. data that increased expectations of a Federal Reserve interest rate cut in September.
FUNDAMENTALS
* Spot gold was down 0.2% at $2,386.58 per ounce, after reaching its highest level since May 22 on Friday. U.S. gold futures also slipped 0.2% to $2,393.80.
* Data released on Friday revealed that the unemployment rate hit a 2-1/2-year high of 4.1%, indicating a softening labor market.
* Market analysts are anticipating a 78% likelihood of a rate cut by the U.S. central bank in September, according to CME’s Fedwatch Tool. Traders are also factoring in an increasing probability of a second rate cut in December.
* Lower interest rates diminish the cost of holding non-interest-bearing gold, making it more attractive for investors.
* Despite the positive sentiment towards gold, prices were constrained by the news that China’s central bank did not add gold to its reserves for the second consecutive month in June.
* Indian physical gold dealers offered discounts last week due to elevated prices, with hopes pinned on a potential reduction in import duties in the upcoming budget.
* Perth Mint reported a decline in gold product sales, while silver sales hit their lowest point since June 2019, as stated by the refiner on Friday.
* Spot silver decreased by 0.2% to $31.15, platinum slipped by 0.3% to $1,024.00, and palladium fell by 0.8% to $1,017.78.
(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Rashmi Aich)
Additional Insight
Gold is often seen as a safe-haven asset in times of economic uncertainty or market volatility, which can drive its prices higher. The anticipation of rate cuts by the Federal Reserve tends to benefit gold as it reduces the opportunity cost of holding the precious metal compared to interest-bearing assets. Additionally, geopolitical tensions and trade disputes can also contribute to fluctuations in gold prices.
