Gold prices advanced in Asian trading on Monday, recovering from a challenging July as investors turned their attention to the upcoming Federal Reserve meeting. The central bank is expected to provide insights into future interest rate cuts.
A weaker dollar also supported the yellow metal. The greenback retreated following Friday’s key inflation data, which suggested some easing in U.S. inflation. This scenario boosts the Fed‘s confidence to lower borrowing rates.
Spot gold increased by 0.4% to $2,395.31 an ounce, while December gold futures rose 0.5% to $2,440.35 an ounce by 00:58 ET (04:58 GMT).
Gold Strengthened by Rate Cut Speculation
The rise in gold prices is largely driven by heightened speculation over potential interest rate cuts, spurred by encouraging PCE Price Index data last week. This data is the Fed’s preferred measure of inflation.
This week’s Fed meeting is now the center of attention. Although the central bank is expected to keep rates unchanged, any indications of future rate cuts will be closely monitored. According to the CME FedWatch Tool, traders are almost fully pricing in a 25 basis point cut in September.
Lower rates benefit gold by reducing the opportunity cost of holding the non-yielding metal. While high rates have pressured gold prices over the past two years, increased safe-haven demand has still driven the yellow metal to record highs.
Other Precious Metals Also Gain
Other precious metals saw gains on Monday, recovering some recent losses. Platinum futures rose 0.8% to $953.35 an ounce, while silver futures increased by 0.8% to $28.242 an ounce.
