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Gold Prices Up on Rate Cut Expectations; Gains Capped by Rebound in U.S. Stocks

Investing.com - Gold prices gained on Friday in Asia on rate cut expectations, but gains were capped by a rebound in U.S. stocks.

Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange, were up 0.4% at $1,348.95 per ounce by 01:15 AM ET (05:15 GMT).

The U.S. Federal Reserve is expected to keep rates unchanged at its meeting on June 19, but markets believe the likelihood of a rate cut before the end of the year has increased due to slowing inflation and rising trade tensions.

Expectations of a cut rose further after data showed the number of Americans filing applications for unemployment benefits rose unexpectedly for the week ended June 08.

Lower interest rates decreases the opportunity cost of holding non-yielding bullion. It would also put pressure on the dollar, making gold cheaper for investors holding other currencies.

“Concerns around Middle East and potential conflicts are one of the factors. There is also investment drive here with bonds renewing their rally, it appears growth concerns remain, ” said Michael McCarthy, chief market strategist at CMC Markets, in a CNBC report.

“Growth concerns and interest rate expectations support gold market. In low growth, highly liquid environment, money has to find a home, it appears a number of investors have concluded that gold would one of those homes.”

Overnight, U.S. stocks ended higher as energy shares outperformed following reports of suspected attacks on two tankers off the coast of Iran that boosted oil prices.

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