Gold prices fall in early trade

31 Jul 2023 , 10:10 AM

Gold prices were set to increase the most in four months on Monday, aided by growing predictions that major central banks are reaching the conclusion of their current monetary policy tightening cycles in their struggle to contain inflation.

Spot gold was down 0.2% at $1,956.02 per ounce, while US gold futures were down 0.3% at $1,955.40 per ounce.

Gold prices are expected to conclude the month roughly 2% higher, the highest since March, as concerns that US interest rates may be nearing their peak have placed the dollar on track for its second consecutive monthly loss.

Rising interest rates discourage the purchase of non-interest-paying bullion priced in dollars.

Data released on Friday showed that annual U.S. inflation climbed at the weakest rate in more than two years in June, confirming expectations that the Federal Reserve was nearing the end of its quickest rate hike cycle since the 1980s.

Two European Central Bank members raised the potential of an end to the ECB’s sharpest and longest streak of interest rate increases on Friday, as the prognosis for the eurozone economy deteriorated despite persistently high inflation.

On Friday, the Bank of Japan signalled the beginning of a gradual withdrawal from decades of huge monetary stimulus, enabling the country’s interest rates to climb more freely in step with rising inflation and economic development.

Chinese physical gold premiums hit a four-month high last week on strong demand, while a price drop fueled a minor recovery in Indian purchases.

The SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, reported a 0.3% drop in holdings on Friday.

Other precious metals appeared to be on track for monthly gains, with spot silver leading at 7% but remaining stable on the day at $24.33 per ounce. Platinum fell 0.3% to $932.16, while palladium held steady at $1,245.73.

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