Gold prices fell on Thursday as the U.S. dollar strengthened and investors assessed several sets of economic data showing that inflation progress has stalled, suggesting that the Federal Reserve might be cautious about further interest rate cuts.
In the UAE, gold rates declined with 24-carat gold and 22-carat gold losing AED2.25 to AED318.50 and AED294.75, respectively. Additionally, 21-carat gold and 18-carat gold declined AED2 to AED285.50 and AED244.50.
Globally, spot gold dipped 0.31 percent to $2,632.51 per ounce, as of 6:10 GMT. Meanwhile, U.S. gold futures declined 0.31 percent to $2,656.59.
The dollar index was up 0.15 percent to 106.25, reducing gold’s appeal among holders of other currencies.
Fed rate cut concerns impact bullion
Market focus shifted to the Fed’s rate cuts after the latest Core Personal Consumption Expenditures (PCE) data suggested slowing inflation, raising expectations that the Fed’s policy next year might be less dovish than previously expected.
Meanwhile, the Fed’s struggle to bring inflation back to its 2 percent target, in addition to the possibility of higher tariffs under the upcoming Trump administration, may constrain the U.S. central bank’s ability to implement rate cuts next year.
Markets now see a 68.2 percent chance of a 25-basis-point rate cut in December, according to the CME FedWatch tool.
The benchmark 10-year US Treasury yields rebounded from a level not seen in a month, which supported the U.S. dollar in reversing some of its losses, impacting gold prices further. Mexican President Claudia Sheinbaum warned of retaliation if Trump enforces a 25 percent tariff, citing potential U.S. job losses and higher consumer prices.
Earlier this week, Trump pledged to impose tariffs on a wide range of products coming into the U.S. from Mexico, Canada, and China.
U.S. data shows resilient economy, slowing inflation progress
The U.S. Bureau of Economic Analysis (BEA) reported on Wednesday that the PCE Price Index rose to 2.3 percent year-on-year in October from 2.1 percent in September. The report also revealed that the core PCE Price Index, which excludes volatile food and energy prices, rose 0.3 percent on a monthly basis and edged higher from 2.7 percent in September to 2.8 percent last month.
Meanwhile, data published by the U.S. Commerce Department showed that the world’s largest economy expanded at a healthy 2.8 percent annual pace in the third quarter on strong consumer spending, which rose by 3.5 percent.
In addition, the Labor Department said that the number of Americans filing new applications for unemployment-related benefits fell by 2,000, to a seasonally adjusted 213,000 during the week ended November 23. This helps offset a slight disappointment from the U.S. Durable Goods Orders, which rose 0.2 percent in October, lower than expectations. Excluding transportation, orders increased by 0.1 percent, missing estimates.
Gold is seen as a safe-haven investment during periods of economic or geopolitical instability, including trade wars. Trading is expected to be thin with U.S. markets closing on Thursday for the Thanksgiving holiday.
Read: Oil prices remain steady amid mixed U.S. inventory data, easing Middle East tensions
Geopolitical tensions
Russia launched a large-scale missile and drone attack against Ukraine today, targeting energy infrastructure. With tensions between the two nations rising, gold prices may see some support in the near term.
Elsewhere, gold prices recovered on Wednesday as traders priced in the news of a ceasefire deal between Israel and Lebanon. The two parties agreed on a 60-day ceasefire deal which has, so far, held.
Other precious metals
The precious metals market saw mixed movement on Thursday as gold prices declined. Spot silver lost 0.69 percent to $29.87 while platinum gained 0.20 percent to $929. In addition, palladium rose 0.58 percent to $977.61.
