Gold prices rose on Friday, supported by a dip in the U.S. dollar and growing geopolitical tensions. However, they remained on track for a weekly decline as markets awaited key U.S. data for more clues about the Federal Reserve‘s monetary policy direction.
In the UAE, gold rates rose AED0.15 with 24-carat gold reaching AED322 and 22-carat gold rising to AED298.25. Additionally, 21-carat gold rose to AED288.75 and 18-carat gold reached AED247.50.
Globally, spot gold gained 0.81 percent to $2,662.72 per ounce, as of 6:08 GMT. However, bullion was down 2 percent so far this week. Meanwhile, U.S. gold futures rose 1.07 percent to $2,689.86.
The dollar index fell 0.14 percent to 105.90, raising gold’s appeal among holders of other currencies.
Rising geopolitical tensions
Escalating geopolitical tensions are pushing investors toward gold as a safe-haven investment amid geopolitical and economic uncertainty. Gold prices also recovered some losses as the dollar weakened making it a more attractive investment.
The Israeli military said its air force struck a facility used by Hezbollah to store mid-range rockets in southern Lebanon on Thursday amid mutual ceasefire breach accusations. In addition, Russia on Thursday unleashed its second big attack on Ukraine’s energy infrastructure this month, triggering deep power cuts across the country. Russian President Vladimir Putin said that he may use new hypersonic missiles to attack decision-making centers in Ukraine in response to the latter’s firing of Western missiles at its territory.
Bullion is traditionally a safe investment during economic and geopolitical uncertainties such as conventional or trade wars. Analysts noted that gold prices could test or dip below the key $2,600 level, with the metal likely to remain in a consolidation phase through December.
Fed meeting nears
The prospects for more interest rate cuts by the Fed impacted the U.S. dollar, which was another factor that supported the rise in gold prices. That said, expectations that U.S. president-elect Donald Trump’s policies will boost inflation, along with signs that the progress in lowering U.S. inflation stalled in October, may restrict the Fed from easing rates further.
Earlier this week, Trump pledged to impose tariffs on all products coming into the US from Canada, Mexico and China, which, in turn, could trigger trade wars.
Markets are pricing in a 66.5 percent chance of a 25-basis-points rate cut by the Federal Reserve in December, potentially marking 2024’s third cut, according to the CME Fedwatch tool.
Rate cut outlook
Minutes from the November FOMC meeting released earlier this week revealed that committee members were divided over how much farther they may need to cut interest rates. In addition, the PCE data showed on Wednesday that the progress in lowering inflation in the U.S. stalled in October. Investors also seem convinced that Trump’s policies will boost inflation. This suggests that the Fed may proceed cautiously, fueling uncertainty over the outlook for interest rates in 2025 and limiting any further decline in the U.S. Treasury bond yields.
Major U.S. data releases next week, including job openings, the ADP employment report, and the employment report, are expected to offer cues about the Fed’s rate cut outlook.
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Other precious metals
The precious metals market saw upward movement on Friday as gold prices recovered some losses. Spot silver gained 1.40 percent to $30.68 while platinum rose 1.16 percent to $942.05. In addition, palladium rose 1.51 percent to $990.
