Dubai gold prices gain as rate hike bets fizzle

Dubai: Gold prices experienced a slight increase on Monday as traders worldwide reduced their expectations of an interest rate hike by the US Federal Reserve later this month. The change in market sentiment was influenced by statements made by Federal Reserve Chair Kevin Warsh. Traders now anticipate a lower probability of a quarter-point rate increase, with estimates below 20% after Warsh's remarks were interpreted as favoring a pause at the upcoming meeting.

Typically, gold tends to underperform when interest rates rise, as it does not generate interest income. In the UAE, gold prices saw a modest rise of Dh2-Dh3 per gram on Monday. Currently, 24-karat gold is trading at Dh504.25 per gram, while 22-karat gold is at Dh467, down from Dh464.75 in the previous session. 14-karat gold remains below the Dh300 mark at Dh299.25.

A surprising inflation reading from the US last week had initially fueled expectations of a Fed rate hike and lifted the dollar, but Warsh's remarks dampened that momentum. Gold has found support from a decline in tech stocks, driven by concerns over the AI investment surge, as well as a bond rally that has kept yields lower. Despite its safe-haven appeal and recent inflows into gold-backed exchange-traded funds (ETFs), gold has still declined around 20% since the US-Iran conflict erupted in late February.

In the near term, gold prices are expected to remain under pressure, with traders still considering the likelihood of another rate hike before the year's end. At 09:30 am Dubai time, spot gold was trading 0.42% higher at $4,177.78 an ounce, while silver rose by 1.31% to $57.56. Platinum and palladium also experienced price increases.

Meanwhile, the Bloomberg Dollar Spot Index, which monitors the greenback, fell 0.1% after a 0.3% decline last week.