Gold prices climbed for the second consecutive day on Wednesday amid increasing speculation that the Federal Reserve (Fed) might initiate interest rate cuts starting from the September meeting. This outlook prompted declines in US Treasury bond yields and the US Dollar, providing favorable conditions for the precious metal. As of now, XAU/USD trades at $2,372, marking a gain of over 0.30%.
The drop in US Treasury bond yields, with the benchmark 10-year note falling by one-and-a-half basis points to 4.288%, alongside the US Dollar Index (DXY) slipping below the 105.00 level and losing 0.06%, has bolstered gold, which does not yield interest and thus becomes more attractive in a low-interest-rate environment.
Federal Reserve Chair Jerome Powell reiterated his stance during his appearance before the US House of Representatives, echoing statements made at the Senate committee on Tuesday. Powell acknowledged progress on inflation but expressed reservations about the effectiveness of rate cuts in achieving the Fed’s 2% inflation target.
Despite recent retracements, gold continues to benefit from a second consecutive month of inflows into Gold exchange-traded funds (ETFs) in June, driven by increased holdings in Europe and Asia-listed funds.
Looking ahead, investors are focused on the release of US June inflation figures on Thursday, along with Initial Jobless Claims and University of Michigan Consumer Sentiment data. These indicators will play a crucial role in determining the future trajectory of gold prices.
