Gold futures rise over 1% as US dollar dips

Gold prices surged today, July 28, as the US dollar sank on Federal Reserve Chairman Jerome Powell's statements on interest rates.

Gold futures for August delivery rose 1.37% to $1,743.10 an ounce at 12:11 PM Makkah time, while spot prices gained 0.69% to $1,746.43 per ounce.

Similarly, silver futures for September delivery increased 4.09% to $19.36 an ounce. The spot price for platinum also jumped by 0.77% to $893.33, as the spot price of palladium climbed up 2.58% to $2,083.37.

Meanwhile, the main dollar index, which measures the performance of the US currency against a basket of six currencies, shed 0.19% to 106.25 points, after falling to 106.05 points earlier in trading.

On July 27, Fed officials raised the benchmark interest rate by 75 basis points for the second consecutive month, bringing its federal funds rate to a range between 2.25% and 2.5%.

Another “unusually large” increase in interest rates may be appropriate at the Federal Reserve’s September meeting, but the decision will depend on the incoming economic data, Powell said during a press conference.

However, he indicated that the pace of monetary tightening will slow over time, which supported markets' expectations of the bank to ease or end the rate hike strategy next year.

Financial markets underestimate how far the US central bank will go to stem the acceleration of inflation, former New York Federal Reserve Chairman Bill Dudley said during his interview with Bloomberg, noting that the Fed needs tighter financial conditions to reduce inflation.

Meanwhile, a report issued by the World Gold Council showed that global demand for gold fell by 8% on an annual basis to 948 tons in Q2 2022, as a result of the pressures that the precious metal faced due to the tightening of monetary policy and stronger US dollar in the past months.