Gold prices saw a decline on Tuesday despite the dollar easing as investor focus shifted to key U.S. inflation data, which could shift how soon the Federal Reserve cuts interest rates.
In Saudi Arabia, 24-carat gold saw a 0.27 percent decline to SAR283.1 per gram and SAR8,805.29 per ounce.
Globally, spot gold saw a 0.13 percent decline to $2,348.02 per ounce, as of 6:17 GMT, after rising around 1 percent on Monday. Meanwhile, U.S. gold futures saw a 0.26 percent decrease to $2,347.55.
Fed’s policy stance
A very strong dollar and a possible change in the U.S. monetary policy stance to the Fed looking into interest rate hikes rather than cuts are some of the major risks to the decline of gold prices. However, in the short term, spot gold remains in the positive, with the $2,310 level being a vital support level this week.
Inflation data
The core personal consumption expenditures price index (PCE), the Fed’s preferred measure of inflation, is due for release on Friday. This data is highly anticipated as it could shape the Fed’s monetary policy decisions in the coming months.
Minutes from the recent Fed meeting revealed that while the policy rate will remain stable at its current level for now, there were discussions about potential further rate hikes. Market sentiment, according to the CME FedWatch Tool, indicates a 62 percent chance of a rate cut by November 2024, reflecting growing skepticism about the extent of rate cuts next year.
Investors traditionally view gold as a hedge against inflation, but the dynamics of interest rates complicate this role. Thus, higher interest rates increase the opportunity cost of holding non-yielding assets like gold, which can impact prices.
Vietnam’s domestic market
In other developments, Vietnam’s central bank announced on Monday that it would cease auctioning gold in the domestic market. Instead, it plans to introduce a new measure aimed at stabilizing domestic gold prices, which could have local market implications.
Other precious metals
In addition to gold prices, the market for other precious metals showed mixed movements. Spot silver declined by 0.56 percent to $31.45 per ounce, platinum declined 0.18 percent to $1,055.13 per ounce while palladium saw a 0.01 percent increase to $993.88 per ounce.
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