By: Economy Middle East

Gold prices declined on Tuesday after reaching a two-week high in the previous session, as investors adopted a cautious stance ahead of the release of the U.S. Federal Reserve’s June meeting minutes, which are expected to provide further insight into the monetary policy approach of new Chair Kevin Warsh. 

Spot gold fell 0.62 percent to $4,129.98 per ounce by 8:43 UAE time, while U.S. gold futures for August delivery eased 0.64 percent to $4,140.69. The precious metal has remained highly sensitive to shifts in interest rate expectations, with markets closely watching signals from Federal Reserve policymakers for clues on the future direction of borrowing costs. 

In the UAE, gold rates also moved lower across all major purities. The price of 24-carat gold fell by AED4.00 to AED499.00 per gram, while 22-carat gold declined by AED4.00 to AED462.00. Twenty-one-carat gold dropped AED3.75 to AED443.00 per gram, 18-carat gold fell AED3.25 to AED379.75, and 14-carat gold declined AED2.50 to AED296.25 per gram. 

Fed in focus

The minutes from the Federal Open Market Committee’s June 16–17 meeting are scheduled for release on Wednesday and are expected to provide greater clarity on the Federal Reserve’s policy direction under its new leadership.

Kevin Warsh’s first meeting as Federal Reserve chair removed references to the likely path of future interest rate adjustments, reflecting the view that offering less forward guidance could allow policymakers greater flexibility in responding to changing economic conditions.

Fed Governor Christopher Waller, however, presented a different perspective on Monday.

He said forward guidance can remain a valuable policy tool that helps accelerate the transmission of monetary policy when used under appropriate circumstances.

Markets continue to assess how differing views among policymakers could influence the outlook for interest rates during the remainder of the year. Traders are also evaluating incoming economic data for indications of whether inflation and labour market conditions will support further monetary tightening or allow policymakers to adopt a more measured approach.

Gold rebound faces pressure

Gold has retreated more than 25 percent from the record highs reached earlier this year after the U.S.-Israeli conflict with Iran fuelled inflation concerns, strengthened the U.S. dollar, and reinforced expectations that interest rates would remain higher for longer. Despite the broader pullback, bullion climbed to a two-week high on Monday after a ceasefire agreement eased some inflation concerns and weaker-than-expected U.S. employment data prompted investors to scale back expectations for near-term interest rate increases.

According to the CME FedWatch Tool, traders now assign about a 56 percent probability to a rate increase in September, down from more than 60 percent before the latest employment figures were released. Lower interest rates generally improve the appeal of non-yielding assets such as gold by reducing the opportunity cost of holding bullion. Meanwhile, Hong Kong launched a central clearing system for gold on Tuesday and resumed gold futures trading as it seeks to strengthen its position as a regional precious metals trading and reserve hub. Elsewhere in the metals market, spot silver fell 1.41 percent to $61.02 per ounce, platinum declined 0.97 percent to $1,626.15, and palladium slipped 0.64 percent to $1,245.00 per ounce.