Saudi Arabia Expected to Become More Attractive after Interest Rate Cuts

The kingdom aims to achieve an annual foreign direct investment inflow of over $100 billion (Asharq Al-Awsat)
The kingdom aims to achieve an annual foreign direct investment inflow of over $100 billion (Asharq Al-Awsat)
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Saudi Arabia Expected to Become More Attractive after Interest Rate Cuts

The kingdom aims to achieve an annual foreign direct investment inflow of over $100 billion (Asharq Al-Awsat)
The kingdom aims to achieve an annual foreign direct investment inflow of over $100 billion (Asharq Al-Awsat)

The US Federal Reserve cut interest rates for the first time in over four years at its meeting on Wednesday, a dramatic shift after more than two years of high rates helped tame inflation but that also made borrowing painfully expensive for consumers.
As the Fed and other central banks around the world lower rates, emerging markets could benefit from this shift in policy.
Historically, lower rates in advanced economies make emerging markets more attractive by encouraging capital inflows, boosting economic growth, and supporting investments in key sectors like infrastructure and technology.
Rate cuts usually reduce borrowing costs, which can help emerging market governments and companies by making it cheaper to access capital for expansion and easing debt repayment pressures.
Additionally, low rates in places like the US and EU often drive global investors to seek higher returns in faster-growing markets, increasing demand for emerging market assets.
Emerging economies can also benefit from greater currency stability as capital inflows strengthen their balance of payments, which helps stabilize inflation and make essential imports like food and energy more affordable.
Lower rates can also support domestic spending, boosting demand for local goods and services.
Saudi Arabia is emerging as one of the world’s most attractive markets as global interest rates decline. The kingdom’s dynamic economy and ongoing reforms position it well to take advantage of cheaper borrowing costs and support long-term sustainable growth.
According to Arun Leslie John, Chief Market Analyst at Century Financial, the outlook for Saudi Arabia is very positive compared to global trends, driven by strong growth in non-oil sectors and government efforts to attract foreign investment.
John told Asharq Al-Awsat that Saudi Arabia and other Gulf countries, whose currencies are tied to the US dollar, are expected to benefit from upcoming rate cuts, which will lower financing costs, boost liquidity, and encourage both spending and investment in the region.
These favorable conditions could speed up economic growth, boost stock prices, and make Saudi Arabia an even more attractive investment destination, he said.
Saudi Arabia aims to attract over $100 billion in annual Foreign Direct Investment (FDI) by 2030, a goal that seems achievable with the current easing of monetary policy, John added.
John also expects Saudi banks to benefit from lower interest rates by the end of 2024, which will be crucial for supporting lending and the government’s diversification plans.



Gold Extends Fall to Sixth Day ahead of Fed, US Inflation Data

A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)
A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)
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Gold Extends Fall to Sixth Day ahead of Fed, US Inflation Data

A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)
A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)

Gold extended losses for a sixth straight session on Wednesday to hover near the two-week lows hit the day before on lowered expectations of deeper rate cuts, as traders turned their focus to the Federal Reserve's meeting minutes and inflation data.

Spot gold fell about 0.2% to $2,617.79 per ounce by 1145 GMT, having touched its lowest level since Sept. 20 on Tuesday. US gold futures for December delivery was steady at $2,636.20.

"The precious metals sector seems somewhat disappointed after yesterday's meeting by China's National Development and Reform Commission, which reignited concerns about growth and demand from China in Q4. Also, gold is confronting the possibility of less aggressive rate cuts," Zain Vawda, market analyst at MarketPulse by OANDA, said, Reuters reported.

Non-yielding bullion is considered a safe investment and thrives in a low interest rate environment.

China is the world's largest consumer of gold, although record high prices and worries about economy have dampened consumer sentiment. A rebound in gold prices to a record peak also dashed the Indian bullion industry's expectations of a lucrative festival season.

Even after the losses, gold prices are set for an over 25% rise this year after prices hit a record peak of $2,685.42 on Sept. 26.

"The market is currently awaiting the upcoming inflation data for US. Since last week's payroll data, the market is discussing if we are in soft landing or no landing scenario," UBS analyst Giovanni Staunovo said.

The minutes from Fed's September policy meeting are due at 1800 GMT, while the US Consumer Price Index (CPI) and Producer Price Index (PPI) data is due on Thursday and Friday, respectively.

"A significant rise in inflation could alter the scenario. However, considering the geopolitical situation and market uncertainties, we might continue to see range-bound trading with limited downside rallies," said Vawda.

In other metals, spot silver steadied at $30.69 per ounce. Platinum held steady at $949.70 and palladium fell 1% to $1,011.51.