Gold prices rise after worst week in more than three years

The U.S. dollar index lost some of its recent gains after rising 1.6 percent last week

Geopolitical developments over the weekend drove some haven flows and supported the precious metal in gaining strong positive momentum

Published: Mon 18 Nov 2024, 11:01 AM

Gold prices rose over 1 percent on Monday after witnessing a sharp decline last week as the recent rally in the U.S. dollar stalled. Traders now await comments from Federal Reserve officials this week for more insight into the U.S. interest rate trajectory.

In the UAE, gold rates marked a notable recovery, with 24-carat gold gaining AED3 to AED313.75 and 22-carat gold rising AED2.75 to AED290.50. Meanwhile, 21-carat gold rose AED2.75 to AED281.25 and 18-carat gold gained AED2.25 to AED241.

Globally, spot gold rose 0.71 percent to $2,582.41 per ounce, as of 6:11 GMT, after falling to its worst week in more than three years on Friday. Gold prices gained close to 30 percent in the last year, reaching an all-time high of $2,790.15 in late October. Meanwhile, U.S. gold futures gained 0.73 percent to $2,588.85.

Dollar rally stalls

The U.S. dollar index lost some of its recent gains after rising 1.6 percent last week. A weaker dollar makes bullion less expensive for buyers holding other currencies. However, gold prices remained below the $2,600 mark due to expectations of a less aggressive rate cut cycle by the Fed.

Gold prices registered their biggest weekly decline since September 2023 and dropped to over a two-month low last week amid the recent strong U.S. dollar rally to over a one-year high. However, geopolitical developments over the weekend also drove some haven flows and supported the precious metal in gaining strong positive momentum. Over the weekend, Russia launched its most significant airstrike on Ukraine in nearly three months, inflicting substantial damage on Ukraine’s electrical infrastructure.

Rate cut pace to slow

At least seven U.S. central bank officials are due to speak this week. Strong U.S. economic and inflation data continue to reshape expectations among Fed policymakers over the pace and extent of rate cuts. This came as investors last week further decreased their expectations for a rate reduction in December.

Data on Friday showed that U.S. retail sales increased slightly more than expected in October, highlighting the economy’s resilience. Higher interest rates reduce the appeal of holding non-yielding assets like gold.

Traders are currently pricing a 65.3 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.

Inflation concerns persist

In addition, investors now seem convinced that President-elect Donald Trump’s tariff plans and debt-funded tax cuts would fuel inflation, potentially slowing the Federal Reserve’s rate easing cycle. Fed chair Jerome Powell said last Thursday that there’s no need to hurry into cutting interest rates amid a resilient economy, a strong job market, and inflation remaining just above the 2 percent target.

Meanwhile, Boston Fed president Susan Collins said in an interview that another rate cut in December is on the table, but it is not a “done deal” and that there’s no preset path for monetary policy. Separately, Chicago Fed president Austan Goolsbee noted that as long as we keep making progress toward the 2 percent inflation goal, rates will be a lot lower than where they are now.

Read: Oil prices surge amid intensifying Ukraine-Russia conflict, persistent demand concerns in China

Other precious metals

As gold prices recovered, the precious metals market witnessed positive movement. Spot silver gained 1.22 percent to $30.58 while platinum rose 1.14 percent to $949.28 and palladium surged by 1.71 percent to $967.05.