Gold prices fell on Thursday as investors booked profits after prices hit over a one-month high on increasing bets that the U.S. Federal Reserve will cut interest rates in its next meeting.
In the UAE, gold rates rose with 24-carat gold gaining AED2.5 to AED328.5 and 22-carat gold rising by AED2.25 to AED304.25. Additionally, 21-carat gold increased by AED2.25 to AED294.5 while 18-carat gold rose by AED1.75 to AED252.25.
Globally, spot gold fell 0.28 percent to $2,713.17 per ounce, as of 6:10 GMT, after hitting its highest level since November 6 at $2,725.79. Gold prices hit an all-time high of $2,790.15 in late October. Meanwhile, U.S. gold futures fell 0.35 percent to $2,747.05.
Fed rate cut bets surge
Investors booked profits after gold prices surged due to several factors including escalating geopolitical tensions, central bank buying in China, and U.S. inflation figures being in line with market expectations. In six days, the Federal Reserve will decide whether to cut rates this month. Traders currently expect a 98.6 percent chance of a 25-basis-point cut this month, according to the CME FedWatch tool.
Non-yielding assets like gold are seen as safe investments during economic and geopolitical turmoil and thrive in a low-interest rate environment.
The release of the mostly in-line U.S. consumer inflation figures on Wednesday reinforced market expectations that the central bank will lower borrowing costs again at its upcoming policy meeting next week. The U.S. Bureau of Labor Statistics (BLS) reported that the headline consumer price index rose 0.3 percent in November, marking the largest gain since April.
The yearly inflation rate edged up to 2.7 percent from 2.6 percent in October. The report also revealed that the core gauge, which excludes volatile food and energy prices, increased 0.3 percent during the month and was up 3.3 percent compared to the same period last year.
Despite the data showing a rise in inflation, it is unlikely to discourage the Fed from cutting rates for a third time next week against the backdrop of a cooling labor market. Market focus now shifts to the U.S. producer price index data, due at 13:30 GMT, for additional insights into the Fed’s 2025 policy.
Bank of Canada cuts rates
Elsewhere, the European Central Bank will likely cut rates by 25 basis points, taking the benchmark rate to 3 percent. The Bank of Canada slashed its key policy rate by 50 basis points to 3.25 percent on Wednesday to help address slower growth. Meanwhile, the Swiss National Bank (SNB) will likely lower the key interest rate by a quarter point on Thursday.
Gold remains supported
Central bank buying, monetary policy easing and geopolitical tensions have propelled bullion to multiple record highs this year, placing it on track for its best year since 2010, with almost a 33 percent increase so far.
Despite the recent dip in gold prices, persistent geopolitical risks stemming from the Russia-Ukraine war and conflicts in the Middle East, along with concerns about U.S. President-elect Donald Trump’s trade tariffs, continue to act as a tailwind for the safe-haven metal.
Concerns regarding the Fed’s next move come amid expectations that Trump’s expansionary policies will rekindle inflationary pressures and might push the central bank to adopt a less dovish stance which might limit gains for gold prices. Trump pledged to impose big tariffs against America’s three biggest trading partners, Mexico, Canada, and China, and also threatened a 100 percent tariff on ‘BRICS’ nations.
Read: Oil prices surge modestly amid China’s stimulus optimism and U.S. economic indicators
Other precious metals
Amid the decline in gold prices, the precious metals market saw positive movement on Thursday. Spot silver gained 0.75 percent to $32.14 while platinum rose 0.64 percent to $945.65 and palladium increased by 0.51 percent to $986.50.
