Gold poised to end best month in four as interest rates near peak

GOLD prices were bound to post their biggest monthly rise in four on Monday (Jul 31), helped by growing expectations that major central banks may be nearing the end of current monetary policy tightening cycles in their fight to rein in inflation.

Spot gold was down 0.2 per cent at US$1,956.02 per ounce by 0110 GMT, while US gold futures slipped 0.3 per cent to US$1,955.40 per ounce.

Gold prices are set to end the month about 2 per cent higher, the most since March, as expectations that US interest rates could be nearing their peak sent the US dollar on track for its second straight monthly decline.

Higher interest rates discourage the buying of non-interest-paying bullion, which is priced in US dollars.

Data on Friday showed annual US inflation rose at its slowest pace in more than two years in June, cementing expectations that the Federal Reserve was closer to ending its fastest interest rate hiking cycle since the 1980s.

Two European Central Bank (ECB) policymakers on Friday raised the prospect of an end to the ECB’s steepest and longest string of interest rate rises, as the outlook for the eurozone economy worsened despite stubbornly high inflation.

The Bank of Japan heralded the start of a slow shift away from decades of massive monetary stimulus on Friday, allowing the country’s interest rates to rise more freely in line with increasing inflation and economic growth.

Chinese physical gold premiums rose to a four-month high last week on robust demand, while a price retreat fuelled a slight recovery in purchases in India.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.3 per cent on Friday.

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Other precious metals looked set to post monthly rises, with spot silver leading at 7 per cent, but steady on the day at US$24.33 an ounce. Platinum eased 0.3 per cent to US$932.16, and palladium held at US$1,245.73. REUTERS