Gold Heads for First Monthly Gain in Four Months on Fed Rate Outlook
Bullion remains on course for its first monthly advance in five months, with easing inflation, shifting Federal Reserve expectations and rising Middle East tensions shaping investor sentiment.
New Delhi, Jul 31: Gold prices remained firm on Friday and were on track to register their first monthly gain in five months, supported by changing expectations around U.S. monetary policy and escalating geopolitical tensions in the Middle East. Despite a slight dip in early trading, the precious metal was poised to end July with its strongest monthly performance since February.
Spot gold eased 0.2% to $4,096.29 per ounce in early trade, while U.S. gold futures for August delivery edged 0.1% higher to $4,094.10. Even with the marginal decline, bullion was heading for a weekly rise of around 1.1% and a monthly increase of more than 2.2%, reflecting renewed investor interest in safe-haven assets.
Market sentiment strengthened after the U.S. Federal Reserve kept benchmark interest rates unchanged at its latest policy meeting. Investors closely monitored the central bank’s commentary for indications on inflation and future policy decisions. Although the Fed refrained from offering a clear timeline for its next move, expectations of an immediate rate increase eased following the meeting.
According to market pricing tracked by CME Group’s FedWatch tool, the probability of a September rate hike declined significantly after the Fed announcement. Softer expectations for tighter monetary policy have generally been supportive of gold, as lower interest rates reduce the opportunity cost of holding non yielding assets.
The U.S. dollar recovered modestly after suffering its sharpest single-day fall since January 2023 in the previous session. While a stronger dollar typically limits gains in gold, continued uncertainty surrounding global economic conditions helped maintain demand for the precious metal.
Geopolitical developments also remained a key driver for bullion prices. Reports of a drone strike targeting gas vessels at Egypt’s Mediterranean port of Damietta raised concerns that the ongoing U.S.-Iran conflict could widen further. The incident heightened fears over the security of shipping routes through the Suez Canal, a critical artery for global energy supplies, increasing demand for traditional safe-haven investments.
Fresh economic data from the United States added another layer to market expectations. The Personal Consumption Expenditures (PCE) Price Index, the Federal Reserve’s preferred inflation measure, showed inflation easing in June with a 0.1% month-on-month decline, marking the weakest reading since April 2020. However, analysts cautioned that renewed tensions in the Middle East could push energy prices higher and potentially reverse the recent moderation in inflation.
Meanwhile, the World Gold Council reported that global gold demand remained broadly stable during the second quarter of 2026. Total demand stood at 1,268.9 metric tonnes, as increased purchases by central banks offset weaker investment demand, highlighting continued institutional interest in the precious metal despite changing market conditions.
Among other precious metals, spot silver traded little changed at $58.98 per ounce, platinum declined 1.3% to $1,638.97, while palladium slipped 0.2% to $1,301.94.
Investors are now awaiting key economic releases, including eurozone inflation figures and the final reading of U.S. consumer sentiment, which could provide fresh direction for global financial markets and influence expectations for future monetary policy.
