Gold prices rose to a one-week high on Tuesday as the U.S. dollar softened, while markets awaited comments from Federal Reserve officials for insight into the U.S. interest rate outlook.
In the UAE, gold rates recorded a remarkable surge, with 24-carat gold gaining AED3.37 to AED317.50 and 22-carat gold rising AED3.50 to AED294. Meanwhile, 21-carat gold rose AED3.5 to AED284.75 and 18-carat gold gained AED3 to AED244.
Globally, spot gold rose 0.55 percent to $2,623.57 per ounce, as of 6:07 GMT, after falling to its worst week in more than three years last week. On Monday gold prices gained close to 2 percent, rising today to their highest since November 12. Gold prices gained close to 32 percent in the last year, reaching an all-time high of $2,790.15 in late October.
Meanwhile, U.S. gold futures gained 0.48 percent to $2,627.10.
U.S. dollar sees profit-booking
Gold prices marked a notable recovery this week as the U.S. dollar started witnessing profit-booking following last week’s rally. A weaker dollar makes bullion less expensive for other currency holders. Analysts attributed the recent movements of the U.S. dollar index to overbuying.
Recent strong economic data has raised concerns on whether the Fed will continue to cut rates after the 75-basis-point reductions since September. Several Fed officials are scheduled to speak this week, potentially offering insights into the outlook of this easing cycle.
Geopolitical risks raise safe-haven demand
On Sunday, Russia launched its largest air strike on Ukraine in almost three months, severely damaging the country’s power system. This led U.S. President Joe Biden to authorize for Ukraine the use of long-range American missiles against military targets inside Russia, which prompted some haven flows and benefited gold prices on Monday.
Geopolitical risks stemming from the Russia-Ukraine war and the ongoing conflicts in the Middle East continue to benefit safe-haven demand for gold. The rise in safe-haven demand is impacting U.S. Treasury bond yields, which, in turn, is shifting investor choices towards non-yielding commodities.
Fed rate cut prospects
The Fed’s December meeting is only 29 days away. During this period, movements in gold prices will likely reflect market sentiment towards any interest rate changes in December. In addition, economic data and comments from officials will likely affect bullion’s movement.
U.S. president-elect Donald Trump’s incoming administration is expected to focus on lowering taxes and raising tariffs, which could fuel inflation and limit the Fed’s ability to ease monetary policy. Several Fed officials, including chair Jerome Powell, recently suggested caution in cutting rates, which further supported the surge in the dollar and impacted gold prices.
Traders are currently pricing a 58.4 percent chance of a 25-basis-point rate cut by the Fed next month, down from 83 percent last week, according to the CME FedWatch tool. Non-yielding assets like bullion thrive in a lower interest rates environment and amid geopolitical uncertainties.
Read: UAE overtakes U.K., becomes second-largest gold hub with over $129 billion in trade
Other precious metals
As gold prices rose further, the precious metals market saw mixed movement. Spot silver gained 0.40 percent to $31.29 while platinum declined 0.06 percent to $966.76 and palladium fell 0.13 percent to $1,003.48.
