Gold prices rose on Monday after top consumer China’s central bank resumed gold purchases following a six-month pause while investors awaited U.S. inflation data this week for insight into the Federal Reserve‘s policy outlook.
In the UAE, gold rates inched up marginally with 24-carat gold gaining AED0.25 to AED319.25 and 22-carat gold remaining unchanged at AED295.5. Additionally, 21-carat gold and 18-carat gold gained AED0.25 to AED286.25 and AED245.25, respectively.
Globally, spot gold gained 0.31 percent to $2,641.27 per ounce, as of 6:19 GMT. Prices have gained 0.84 percent in the last month after hitting a record high of $2,790.15 on October 31. Meanwhile, U.S. gold futures inched up 0.14 percent to $2,663.39.
The dollar index gained 0.11 percent to 106.17, traditionally making bullion less attractive for other currency holders.
China’s gold purchases to boost investor demand
Gold prices rose as China’s central bank resumed gold purchases which may support investor demand in the country which has been muted since the PBOC paused its 18-month buying streak in May. This decision follows Trump’s recent election victory, reflecting the central bank’s proactive approach to safeguarding the economy amid evolving global conditions.
Strong central bank buying, monetary policy easing and geopolitical tensions have driven gold prices to multiple record highs this year, setting the precious metal on track for its best year since 2010 with almost a 28 percent increase so far.
Gold is seen as a safe-haven investment during times of economic and political uncertainty. Moreover, it thrives in a low-interest rate environment.
Fed rate cut bets
Traders are now looking forward to U.S. inflation data due on Wednesday for more insight into the Fed’s rate cut trajectory and its impact on gold prices. The U.S. Bureau of Labor Statistics reported on Friday that nonfarm payrolls rose by 227,000 in November, marking a notable rise from the previous month’s upwardly revised reading of 36,000.
The report also revealed that the unemployment rate rose as expected to 4.2 percent from 4.1 percent in October, raising bets that the Fed will lower rates by 25 basis points at its meeting this month.
According to the CME FedWatch tool, traders are now pricing an 83.4 percent chance of a quarter-point cut this month.
Cleveland Fed President Beth Hammack noted that the economic landscape calls for a modestly restrictive monetary policy, but the market view of one more interest rate cut between now and late January was reasonable. Meanwhile, San Francisco Fed President Mary Daly warned that despite data still leaning toward achieving the inflation target, the central bank might still step in with additional interest rate hikes if price growth begins to spiral once again.
For his part, Chicago Fed President Austan Goolsbee stated that the labor market appears stable and that the progress on inflation is encouraging, while any pause in the rate-cutting would come if conditions in inflation or the labor market change. Meanwhile, Fed Governor Michelle Bowman said that she would prefer that the U.S. central bank proceeds cautiously and gradually in lowering the policy rate as the underlying inflation remains elevated uncomfortably above the 2 percent target.
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Inflation concerns persist
This comes amid expectations that U.S. President-elect Donald Trump’s expansionary policies will rekindle inflationary pressures and might push the Fed to adopt a less dovish stance which might limit gains for gold prices.
However, concerns about Trump’s trade tariffs and their effect on the global economic outlook may impact investor appetite for riskier assets, further supporting demand for safe-haven gold. 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.
Other precious metals
Amid the rise in gold prices, the precious metals market saw mixed movement on Monday. Spot silver fell 0.10 percent to $30.95 while platinum gained 0.25 percent to $932.10 and palladium rose 0.80 percent to $963.67.
