Gold prices experienced a drop on Monday, influenced by a stronger dollar following U.S. President-elect Donald Trump’s warning of hefty tariffs on the BRICS nations.
In the UAE, gold rates fell by AED3.75, with 24-carat gold priced at AED318.25 and 22-carat gold at AED294.50. Similarly, 21-carat gold dropped to AED285.25, while 18-carat gold reached AED244.50.
The demand for gold as a safe haven was also dampened by indications that the ceasefire between Israel and Lebanon was holding. However, ongoing tensions between Russia and Ukraine maintained some level of haven buying. Spot gold decreased by 0.9 percent to $2,629.74 per ounce, and February futures fell 1.1 percent to $2,652.11 per ounce by 23:07 ET (04:07 GMT).
Trump’s tariff threats significantly strengthened the dollar, which in turn pressured gold prices. He announced the possibility of “100 percent tariffs” on the BRICS bloc, cautioning them against seeking alternatives to the dollar. This warning negatively impacted the currencies of these nations and elevated the dollar, as traders anticipated further protectionist measures from the incoming administration. Last week, Trump had also threatened additional tariffs on China, Canada, and Mexico, raising concerns about a potential global trade war.
The dollar’s strength weighed heavily on metal markets across the board. Additionally, uncertainty regarding higher long-term inflation under Trump—which could maintain elevated interest rates—further unsettled the metal markets.
Other precious metals also saw declines, with platinum futures down 0.7 percent to $945.90 per ounce, and silver futures dropping 1.5 percent to $30.648 per ounce.
Read more: Gold prices rise on softer U.S. dollar, set for weekly fall
Copper prices decline amid tariff fears, strong dollar
In the realm of industrial metals, copper prices fell on Monday as concerns regarding additional U.S. tariffs and a robust dollar overshadowed positive data from China, the largest copper importer. Benchmark copper futures on the London Metal Exchange decreased by 0.5 percent to $8,976.50 a ton, while March copper futures declined 0.7 percent to $4.1145 a pound.
China reported an unexpected rise in manufacturing activity for November, according to both government and private purchasing managers’ index data. This improvement coincided with aggressive stimulus measures implemented by Beijing since late September, aimed at bolstering economic growth. Despite these positive developments, markets remained wary of potential economic challenges stemming from a trade war with the U.S. Traders are also anticipating further stimulus initiatives from two significant political meetings scheduled for later in December.
Recent gold price movement
Gold prices saw an uptick on Friday, supported by a dip in the U.S. dollar and escalating geopolitical tensions. Nevertheless, they remained on track for a weekly decline as markets awaited crucial U.S. economic data for insights into the Federal Reserve’s monetary policy direction. In the UAE, gold rates increased by AED0.15, with 24-carat gold reaching AED322 and 22-carat gold rising to AED298.25. Furthermore, 21-carat gold climbed to AED288.75, while 18-carat gold hit AED247.50.
Globally, spot gold rose by 0.81 percent to $2,662.72 per ounce as of 6:08 GMT; however, bullion was still down by 2 percent for the week. U.S. gold futures also increased by 1.07 percent to $2,689.86. The dollar index fell by 0.14 percent to 105.90, enhancing gold’s appeal for holders of other currencies.
Rising geopolitical tensions in the Middle East are driving investors toward gold as a safe-haven asset amidst economic uncertainty. As the dollar weakened, gold prices partially recovered losses, becoming a more attractive investment. Furthermore, Russia launched its second significant attack on Ukraine’s energy infrastructure this month, leading to widespread power outages. Russian President Vladimir Putin indicated the potential use of new hypersonic missiles against decision-making centers in Ukraine in response to Western missile strikes.
Gold as safe haven
Historically, gold has been viewed as a safe investment during times of economic and geopolitical distress, including conventional and trade wars. Analysts suggest that gold prices could either test or fall below the crucial $2,600 level, with expectations of the metal remaining in a consolidation phase throughout December.
Anticipations of further interest rate cuts by the Fed have influenced the U.S. dollar, contributing to the rise in gold prices. Nonetheless, expectations surrounding Trump’s policies potentially driving up inflation, coupled with indications that progress in reducing U.S. inflation stalled in October, could limit the Fed‘s ability to ease rates further. Last week, Trump reiterated his intention to impose tariffs on all imports from Canada, Mexico, and China, which could provoke trade wars.
Markets are currently pricing in a 66.5 percent probability of a 25-basis-point rate cut by the Federal Reserve in December, which would mark the third cut of 2024, according to the CME Fedwatch tool.
