Gold prices experienced a slight decline on Monday as investors awaited the U.S. Federal Reserve policy meeting for any indications on interest rate cuts. Spot gold fell 0.4% to $2,376.2 per ounce, while U.S. gold futures for August delivery dropped 0.2% to $2,375. The strengthening dollar played a role in the decline, with the U.S. dollar rising approximately 0.3% against its rivals, making gold more expensive for other currency holders. Analysts noted that gold consumption in China, the world’s largest gold user, fell by 5.6% in the first half of 2024, although demand for gold bars and coins increased.
Despite the decrease in consumption in China, concerns over escalating conflicts in the Middle East contributed to the continued demand for gold as a hedge against geopolitical risks. Markets are anticipating that the Federal Reserve will lay the groundwork for a potential rate cut in September during its upcoming policy meeting. Market analyst Fawad Razaqzada mentioned that if the Fed confirms a dovish stance, predictions could escalate to as many as three cuts before the end of the year. Gold ETFs, which store bullion for investors, saw net inflows of 9.8 metric tons last week. This marks the third consecutive month of net inflows for Gold ETFs, with a total of 39 tons in July.
In India, another significant gold consumer, the reduction of state gold import taxes to the lowest level in 11 years is expected to boost jewellery and bar and coin demand by 50 metric tons in the second half of 2024. The World Gold Council predicts a positive outlook for Indian gold demand as a result of this policy change. In the global market, spot silver dropped 1.2% to $27.54 per ounce, while platinum rose 1.4% to $948.47 and palladium climbed 0.6% to $905.22.
In conclusion, the decline in gold prices on Monday was influenced by a strengthening dollar and reduced gold consumption in China. However, ongoing geopolitical tensions in the Middle East and anticipation of potential rate cuts from the Federal Reserve supported the demand for gold as a safe-haven asset. While gold ETFs saw net inflows and Indian gold demand is expected to increase due to policy changes, the overall market performance for precious metals remains mixed. Investors will continue to monitor the Federal Reserve’s decisions and geopolitical events for further insights into the future direction of gold prices.
