UAE time, spot gold experienced a decline of 0.28 per cent, reaching $1,954.16 per ounce. The US dollar is currently on track for its second consecutive monthly decline, with interest rates nearing their peak. This development is expected to have a positive impact on precious metal prices, potentially leading to a month-end increase of about two per cent, the most substantial gain since March.
Manish Jaradi, a Strategist at dailyFX, highlighted that interest rate hikes by both the US Federal Reserve and the European Central Bank have been a determining factor influencing the performance of gold in the markets.
Nonetheless, Jaradi pointed out that sentiments shifted when Fed Chair Jerome Powell and ECB President Christine Lagarde adopted a more neutral tone during their respective press conferences. This shift in tone has led to growing expectations that interest rates are approaching their peak levels.
One of the reasons higher interest rates can affect gold is that they tend to discourage investors from buying non-interest-paying bullion. Since gold is priced in dollars, rising interest rates can make alternative investments more attractive due to potential returns and benefits from interest payments.
As a result, this dynamic can dampen the demand for gold and exert downward pressure on its price in the market.