Gold prices saw their strongest monthly performance since March on Wednesday, driven by geopolitical concerns and expectations of an interest rate cut in September, with focus now on the U.S. Federal Reserve’s upcoming policy decision.
By 1341 GMT, spot gold had risen 0.7% to $2,424.29 per ounce, resulting in a gain of over 4% for the month. Similarly, U.S. gold futures also increased by 0.7% to $2,422.50.
“Gold prices continued their positive trend, marking the fourth consecutive day of gains. MCX gold saw an increase of ₹350, trading above ₹69,250, supported by Comex gold, which remained strong above $2,420. Market participants are closely watching for a dovish stance from the US Fed’s policy later this evening, with high hopes for a September rate cut. A hawkish tone from the Fed could dampen gold prices, while a surprise rate cut today could boost them further, as such a move is unexpected. The market has largely priced in one rate cut for September, but the Fed Chair Powell’s comments will be crucial. Comex gold has strong support at $2,380, with major resistance at $2,435,” said Jateen Trivedi, VP Research Analyst – Commodity and Currency, LKP Securities.
Factors Influencing Gold Prices
The Fed is expected to maintain rates at their current levels as it wraps up its two-day meeting today; however, it may indicate the possibility of a rate cut as soon as September.
Amidst the backdrop of geopolitical tensions, Hamas leader Ismail Haniyeh was reportedly assassinated early Wednesday morning in Iran, according to the Palestinian militant group and Tehran. This event has escalated threats of retaliation against Israel, contributing to further instability in a region already grappling with the Gaza war and escalating conflict in Lebanon.
In addition to geopolitical events, the dollar index declined, and U.S. 10-year Treasury yields fell to their lowest level in over four months, providing additional support for non-yielding bullion like gold.
Insight: Amidst geopolitical tensions and expectations of a rate cut, investors are turning to gold as a safe-haven asset, reflecting the metal’s traditional role as a hedge against uncertainty and inflationary pressures.
Spot silver saw a 1.6% increase to $28.83 per ounce but is heading for a second consecutive monthly loss. Platinum rose by 1.3% to $971.55, and palladium surged by 4.5% to $929, although both metals are poised to end the month lower.
