Spot gold rose 0.6% to $2,524.30 per ounce at 0940 GMT, just $7 below last week’s record high of $2,531.60. U.S. gold futures also increased by 0.6%, reaching $2,560.40.
India’s gold demand is poised to stay strong during the upcoming festive season, bolstered by a significant reduction in import duty, which has made gold prices more attractive to buyers. This price drop is expected to fuel increased purchasing activity as consumers take advantage of the more favorable rates, driving robust demand across the country.
On Monday, gold remained close to its record highs, supported by a weaker dollar and dovish comments from U.S. Federal Reserve Chair Jerome Powell. His remarks reinforced market expectations of an interest rate cut in September, further boosting the precious metal’s appeal as investors sought safe-haven assets amidst the anticipated monetary easing.
Gold Prices Increasing: The price of spot gold has increased by 0.6%, reaching $2,524.30 per ounce. This price is very close to the all-time high of $2,531.60, which was achieved just last week. Similarly, U.S. gold futures, which are contracts to buy or sell gold at a future date at a set price, also rose by 0.6%, reaching $2,560.40 per ounce.
Dollar’s Weakness: The U.S. dollar has fallen to its lowest level in over a year. When the dollar weakens, gold becomes cheaper for people who hold other currencies. This is because gold is typically priced in dollars, so if the dollar’s value drops, it takes fewer units of other currencies to buy the same amount of gold.
Treasury Yields Decreasing: The yields on 10-year U.S. Treasury bonds, which are a key indicator of investor confidence and interest rates, have also decreased. Lower Treasury yields often make gold more attractive as an investment, because gold does not pay interest, so when bond yields are low, the opportunity cost of holding gold is reduced.
Potential U.S. Interest Rate Cuts: Jerome Powell, the Chair of the U.S. Federal Reserve, has strongly suggested that the U.S. might cut interest rates in the near future. He mentioned that the pace and scale of these rate cuts would depend on upcoming economic data. Lower interest rates generally make borrowing cheaper and can boost spending and investment, including in assets like gold. This is because lower rates reduce the returns on other investments, making gold a more attractive option.
Gold as an Investment: UBS analyst Giovanni Staunovo explains that the potential for U.S. interest rate cuts could increase demand for gold as an investment. When rates are low, investors often turn to gold as a safe haven because it tends to hold its value well during times of economic uncertainty or when other investments offer lower returns.
