Gold Prices Rebound Amid Lower Energy Costs and Moderating Rate Expectations

The recent rebound in gold prices is not solely driven by safe-haven demand but also influenced by nominal interest rates, energy-driven inflation, U.S. dollar liquidity, and repricing of risk premiums tied to Middle Eastern geopolitical tensions.

Following a sharp drop in oil prices, Brent crude fell to USD 90 per barrel, while U.S. crude declined to USD 83 per barrel. This decrease in energy prices has alleviated upward pressure on both nominal and real interest rates, making gold's ability to rebound more significant.

The Federal Reserve will hold its policy meeting on July 28-29 and announce its rate decision on July 29. The current market baseline expectation remains unchanged rates, but the probability of a hike has risen noticeably since early July, reflecting traders' vigilance toward policy tail risks.