By: Economy Middle East

Gold prices moved lower on Monday as investors secured profits following the precious metal’s climb to a seven-week high in the previous session. Attention has now shifted to upcoming U.S. inflation figures that could offer new direction for the Federal Reserve’s interest rate policy. 

Spot gold declined 0.04 percent to $4,339.73 per ounce as of 09:44 UAE time. The metal had reached its highest level since June 17 on Friday after weaker U.S. nonfarm payrolls data altered expectations for the next Federal Reserve decision.

Meanwhile, U.S. gold futures moved higher on Monday, climbing 0.04 percent to $4,401.55.

In the UAE, gold rates edged lower, with 24-carat gold falling AED0.50 to AED522.75 and 22-carat gold declining AED0.50 to AED484.

In addition, 21-carat gold slipped AED0.25 to AED464.25, while 18-carat gold fell AED0.50 to AED397.75.

Meanwhile, 14-carat gold declined AED0.25 to AED310.25.

The U.S. economy unexpectedly lost jobs in July, while employment gains previously reported for May and June were revised sharply lower. Futures markets subsequently reduced the probability of an interest rate increase at the Federal Open Market Committee’s September 15-16 meeting from more than 50 percent to below that threshold.

Lower interest rates generally strengthen gold’s appeal relative to income-producing assets because bullion does not generate interest.

Inflation tests ahead

Investors are preparing for two major U.S. inflation reports this week. The Consumer Price Index for July is scheduled for release on Wednesday, August 12, followed by the Producer Price Index on Thursday, August 13, according to the official schedule published by the U.S. Bureau of Labor Statistics.

The figures could determine whether markets strengthen their expectations that the Federal Reserve will leave borrowing costs unchanged or again consider tighter monetary policy. Inflation data can also influence Treasury yields and the dollar, two important drivers of international gold prices.

Waterer said softer inflation readings would reinforce the case for the Federal Reserve to keep rates unchanged and could create room for further gains in gold. However, he cautioned that uncertainty in the Middle East remained a risk because renewed escalation that pushed oil prices higher could place the precious metal under pressure.

On the geopolitical front, Iran said it was close to finalising an agreement with Oman that would establish new shipping lanes between the two countries through the Strait of Hormuz. Tehran nevertheless reiterated that Washington would have to meet several conditions before the strategic waterway could reopen.

Elsewhere in precious metals markets, spot silver gained 0.53 percent to $63.95 per ounce, while platinum advanced 0.9 percent to $1,773.20. Palladium moved in the opposite direction, declining 0.29 percent to $1,353.00.

Recent market reversal

Gold’s Monday retreat followed an exceptionally strong end to the previous week. On August 7, spot gold rose 2.3 percent to $4,336.02 per ounce after climbing by more than 3 percent during the session. The metal gained more than 7 percent over the week, marking its strongest weekly advance since January 19 and its best performance in seven months. U.S. gold futures climbed 2.3 percent to settle at $4,399.70. 

The surge followed a volatile conclusion to July. Gold fell to $4,049.83 per ounce on July 31 as the dollar recovered from a more than one-month low. Despite that decline, bullion gained 1.1 percent during July, securing its first monthly advance in five months and its strongest monthly performance since February. Softer inflation figures and lower oil prices had encouraged traders to reduce their expectations for additional U.S. rate increases. 

The recovery came after a steep correction earlier in the year. Gold fell below $4,000 on June 25 for the first time since November 2025 and stood more than 28 percent below the record $5,594.82 reached on January 29, previous data showed. The metal later recorded its largest quarterly decline since 2013 and completed a fourth consecutive monthly loss in June, according to a July 1 update.

Fed policy backdrop

The Federal Reserve left its benchmark interest rate unchanged at 3.5 percent to 3.75 percent on July 29. The decision passed by a vote of nine to three, with Beth Hammack, Neel Kashkari and Lorie Logan preferring a quarter-percentage-point increase. The Federal Reserve said economic activity continued to expand at a solid pace, but inflation remained above its 2 percent objective, partly because of supply shocks affecting sectors including energy.

The subsequent employment report materially changed the policy outlook. The United States lost 23,000 nonfarm jobs in July, compared with the 80,000 increase expected by economists surveyed by Reuters. The unemployment rate remained broadly stable at 4.1 percent. The official figures also showed that employment growth in May and June was revised down by a combined 103,000 positions.

Following the report, rate futures assigned a 43.9 percent probability to a September increase, down from 57 percent before the data were published. The implied likelihood that the Federal Reserve would hold rates rose to 56.1 percent from 43.2 percent. The next scheduled policy meeting will take place on September 15-16, according to the FOMC calendar.

Central banks keep buying

Gold’s longer-term demand picture continues to provide a broader foundation for the market. Total demand, including over-the-counter activity, was unchanged from a year earlier at 1,269 tonnes during the second quarter. First-half demand increased 2 percent to 2,522 tonnes and reached a record value of $380 billion, according to the World Gold Council’s latest demand report.

Gold exchange-traded funds recorded outflows of 45 tonnes during the quarter, while bar and coin investment remained steady from the previous year at 307 tonnes. Jewellery consumption declined to 278 tonnes, its lowest quarterly level since the pandemic, as high prices and wider inflationary pressures affected affordability. The average LBMA afternoon gold price stood at $4,506.29 per ounce, 8 percent below the first-quarter record but 37 percent above its level a year earlier.

Central banks purchased a net 289 tonnes during the second quarter, five times the revised first-quarter total of 57 tonnes and the highest figure recorded for any second quarter. First-half central bank demand nevertheless fell to 345 tonnes, its lowest level since 2022. Poland and China remained prominent buyers, while reported purchases were also made by Uzbekistan, Kazakhstan, Jordan, the Czech Republic, Ghana, Singapore and the UAE, the Council said.

The World Gold Council’s 2026 survey found that 89 percent of participating central banks expected global official gold reserves to increase over the following 12 months. A record 45 percent anticipated increasing their own holdings. The Council expects investment to remain the main source of demand growth during the second half, supported by Asian buying and over-the-counter activity.