UAE gold prices rebound as softer US inflation eases rate hike concerns.
Dubai: Gold prices in the UAE edged higher on Wednesday morning as bullion extended its recovery, supported by easing expectations of an immediate US interest rate hike after softer inflation data.
The price of 24K gold climbed to Dh488.50 per gram at 8.40am on Wednesday, up from Dh487.50 a day earlier. Meanwhile, 22K gold rose to Dh452.25 per gram, compared with Dh451.50 on Tuesday.
Wednesday’s increase marked the second straight daily gain, with 24K gold rising Dh5 from its monthly low of Dh483.50 per gram on July 13. The 22K rate has also recovered, climbing Dh4.50 from its July 13 low of Dh447.75 per gram.
Gold remains below July peak
Despite the recent rebound, gold prices remain well below the highs recorded earlier this month, offering buyers some relief after prices surged during the first week of July.
The 24K gold rate started the month at Dh489.75 per gram before climbing to Dh501.75 on July 3 and reaching a monthly high of Dh503 on July 4 and 5. Prices then slipped below the Dh500 mark, traded unevenly over the following week and fell to a monthly low of Dh483.50 on July 13.
At Dh488.50 on Wednesday morning, the 24K rate remains Dh14.50 below its July peak and Dh1.25 lower than its opening price for the month.
The 22K variety followed a similar trend, rising from Dh453.50 on July 1 to a monthly high of Dh466 on July 4 and 5. It is currently trading Dh13.75 below that peak and Dh1.25 below its opening level for the month.
Cooling inflation supports gold
In global markets, spot gold steadied near $4,050 an ounce after gaining 1.3% in the previous session, as weaker-than-expected US inflation data eased concerns over an imminent interest rate hike and boosted demand for the precious metal.
US consumer prices fell in June for the first time in six years, while a key measure of underlying inflation remained largely unchanged. The softer-than-expected data sparked a rally in government bonds as traders scaled back expectations of a Federal Reserve interest rate hike this month.
Following the inflation report, swap markets lowered the probability of a July rate increase to 17%, down from nearly 50% a day earlier.
Lower interest rate expectations typically support gold, as the precious metal does not generate interest or dividend income. When rates rise, returns on bonds and cash deposits become more attractive, increasing the opportunity cost of holding non-yielding assets such as bullion.
Federal Reserve Chairman Kevin Warsh stopped short of signalling an imminent tightening of monetary policy during his Congressional testimony on Tuesday, although he said interest rates remained one of the tools available to bring inflation back towards the central bank’s 2% target.
Oil prices keep rate risks in focus
The decline in US inflation was aided by the sharpest drop in gasoline prices since 2022, providing relief after the energy price spike triggered by the Iran conflict.
However, renewed hostilities and another rise in crude oil prices could keep inflationary pressures elevated, increasing the likelihood that central banks maintain higher borrowing costs for longer. Such a scenario could weigh on gold by pushing up bond yields and strengthening the US dollar.
Despite the recent rebound, gold has posted only a modest gain so far this month after tumbling 14% in the second quarter, its weakest quarterly performance since 2013. The earlier decline was driven by growing expectations of tighter Federal Reserve policy, rising US Treasury yields and a stronger dollar, while bullion-backed exchange-traded funds continued to record net outflows.
Geopolitical tensions also remained elevated after US President Donald Trump dropped a proposed 20% levy on cargo transiting the Strait of Hormuz following appeals from Gulf allies. However, Washington reinstated its blockade of Iranian vessels and launched strikes aimed at curbing Iran’s ability to target commercial shipping.
The developments have kept energy markets on edge, with any renewed disruption to oil supplies likely to fuel inflation concerns and influence expectations for future central bank interest rate decisions.
