Gold buyers in the UAE encountered marginally elevated prices on Wednesday morning as bullion continued its recovery, influenced by diminishing expectations of a forthcoming US interest rate hike. The 24-karat variety increased to Dh488.50 per gram at 8.40 am, up from Dh487.50 on Tuesday. The 22-karat variety rose to Dh452.25 from Dh451.50 during the same period. Wednesday’s increase marked a second consecutive daily gain, with 24K gold now Dh5 above the monthly low of Dh483.50 recorded on July 13. The 22K rate has increased by Dh4.50 from its low of Dh447.75 recorded on July 13. Despite the recovery, current prices remain significantly lower than the peak levels observed earlier this month, providing buyers with some respite in comparison to the first week of July.

The 24K rate commenced the month at Dh489.75, subsequently experiencing a swift ascent to Dh501.75 on July 3, ultimately peaking at Dh503 on both July 4 and July 5. Prices subsequently declined beneath Dh500 and exhibited volatility throughout the ensuing week, ultimately reaching Dh483.50 on July 13. Wednesday’s rate is Dh14.50 lower than the monthly peak and Dh1.25 below the price observed at the start of July. The 22K variety exhibited a comparable trajectory, increasing from Dh453.50 on July 1 to reach a monthly peak of Dh466 on July 4 and July 5. Its current price is Dh13.75 lower than that peak and Dh1.25 below the opening level for the month. Gold steadied near $4,050 an ounce in global markets after advancing 1.3% during the previous session, supported by weaker-than-expected US inflation data. US consumer prices experienced a decrease in June, marking the first decline in six years, while a key indicator of core inflation remained relatively stable.

The figures prompted a rally in government bonds as traders adjusted their expectations regarding a potential rate increase by the Federal Reserve this month. Swap markets assigned a 17% likelihood to a rate increase in July, a notable decline from nearly 50% just a day prior. Lower interest-rate expectations generally bolster gold, as the metal does not provide interest or dividend income. Higher rates enhance the returns from bonds and cash deposits, thereby elevating the cost associated with holding non-yielding assets like bullion. Fed Chairman Kevin Warsh refrained from indicating a shift towards tighter policy during his Congressional testimony on Tuesday. However, he noted that interest rates continued to be one of the instruments at the central bank’s disposal to steer inflation back towards the 2% target. The decline in US inflation was supported by the most significant drop in petrol prices since 2022, providing some respite following the energy shock triggered by the Iran war. Renewed fighting and another increase in crude prices could extend inflationary pressures, heightening the likelihood that central banks maintain elevated borrowing costs for an extended period.

Such an outcome would exert additional pressure on gold due to elevated bond yields and a more robust US dollar. Gold has recorded a slight increase this month following a 14% decline in the second quarter, marking its most significant quarterly downturn since 2013. Rising expectations of a more stringent Federal Reserve policy, increases in Treasury yields, and a strengthening dollar have all contributed to that decline, while bullion-backed exchange-traded funds have experienced steady net outflows. Geopolitical risks continued to be significant as US President Donald Trump reversed a decision to impose a 20% fee on cargo shipments transiting the Strait of Hormuz, responding to requests from Gulf allies. Washington has reinstated its blockade of Iranian vessels and executed strikes intended to curtail Iran’s capacity to target commercial shipping.