Gold Prices Today: Yellow metal trades higher on low yields after US Fed’s preferred inflation gauge lifts rate cut bets

Gold prices rose one per cent on Friday, July 26, supported by lower US Treasury yields amid growing optimism for an interest rate cut by the US Federal Reserve in September after official data showed US prices rose modestly in June.

Spot gold was up about one per cent to $2,386.99 per ounce after hitting its lowest since July 9 on Thursday. US gold futures for August delivery rose 1.4 per cent to $2,386. Spot silver fell 0.6 per cent to $27.80 per ounce today, tracking its worst week since early December. 

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Platinum was up 0.1 per cent at $931.83, while palladium lost 1.1 per cent to $897. Silver, platinum and palladium were headed for their third straight weekly fall. Coming to domestic prices, gold futures last traded one per cent higher at ₹68,135 per 10 grams on the multi-commodity exchange (MCX).

What's driving gold prices?

-Analysts said that today's mixed-to-weaker US data suggests inflationary pressures and economic activity are waning, paving the way for the US Fed to cut rates twice this year. Fed policymakers got fresh evidence of progress on their battle against inflation, fuelling expectations that they would use their meeting next week to signal interest-rate cuts starting in September.

-Lower interest rates reduce the opportunity cost of holding non-yielding bullion. The personal consumption expenditures (PCE) price index nudged up 0.1 per cent last month after being unchanged in May, said the US Commerce Department's Bureau of Economic Analysis (BEA).

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-Following the data, benchmark 10-year note yields fell to a one-week low. Meanwhile, physical demand in India, the second-largest consumer, received a boost as the country slashed import duties on gold and silver earlier this week. 

-Gold premiums in India jumped to their highest level in a decade this week as well. Analysts said any uptick seen from India or China tends to have an outside effect on the overall demand. They added that the move to reduce the duty (in India) can only positively affect the demand.

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Where are gold prices headed?

"Gold prices opened higher at ₹67,750, with comex gold finding support around $2,350. Prices have taken a hit recently due to the Yen rising with safe-haven buying seen in Yen,'' said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.

‘’However, with the Fed policy meeting next week, all eyes are set on any updates regarding a potential rate cut in September, which could pull Gold prices higher again towards $2,400 in Comex and around ₹70,000 in MCX,'' added Trivedi.