Gold prices hovered near a one-month low on Tuesday as investors awaited the release of key U.S. economic data and comments from Federal Reserve officials for further clarity on the interest rate cut cycle’s outlook.
In the UAE, gold rates declined by AED5.75, with 24-carat gold falling to AED317. Meanwhile, 22-carat gold and 21-carat gold lost AED5.25 to AED293.50 and AED284, respectively. In addition, 18-carat gold declined by AED4.5 to AED243.50.
Globally, spot gold slipped 0.19 percent to $2,606.31 per ounce, as of 6:46 GMT, while December gold futures fell 0.24 percent to $2,611.45 per ounce. Gold prices hit an all-time high of $2,790.15 in late October and since then, they have declined to the lowest levels since October 10.
U.S. dollar holds near four-month high
The U.S. dollar held near a four-month high as investors continued to gravitate towards assets that are benefiting from the incoming Donald Trump administration. A stronger dollar makes gold less attractive for holders of other currencies.
In the aftermath of the election, gold prices have continued to decline as the president-elect’s policies further support the dollar, raising inflation fears that could impact the Fed’s rate cut trajectory next year. Gold is traditionally considered a hedge against inflation, but higher interest rates reduce the appeal of the non-yielding asset.
U.S. rate cut prospects
Market focus now shifts to the October Consumer Price Index data due on Wednesday, the Producer Price Index and weekly jobless claims due on Thursday, and retail sales data due on Friday. Several U.S. central bank officials are also scheduled to speak this week, including Fed chair Jerome Powell.
The outlook for gold prices remains positive. However, a rise in prices in the short term will likely require the dollar to lose some momentum. A softer inflation report would increase the chance of a December rate cut, which may revive gold prices.
Traders are currently pricing a 65 percent chance of the 25-basis point rate cut during the Fed’s December meeting and a 35 percent chance that the central bank will keep rates unchanged, according to the CME FedWatch Tool. Bets were around 80 percent before Trump’s victory last week.
Trump’s victory dampens gold’s appeal
At the end of its two-day policy meeting on Thursday last week, the Federal Reserve cut interest rates by 25 basis points, in line with market expectations. Gold prices registered their worst week in more than five months last week as Donald Trump’s victory in the U.S. presidential election raised fears over the economic implications of policies including higher tariffs, which could keep interest rates higher for longer.
Analysts expect some easing with interest rate cuts as the Fed signals caution, which could limit the rise in gold prices. Trump’s victory raised questions about whether the Fed may proceed to cut rates at a slower and smaller pace. This, in turn, boosted the greenback and weighed on dollar-denominated gold prices.
Bullion is traditionally considered a hedge against inflation, but higher interest rates raise the opportunity cost of holding non-yielding assets like gold.
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Other precious metals
As gold prices declined further, spot silver dipped 1.38 percent to $30.26 per ounce. Meanwhile, platinum fell 1.15 percent to $953.80 while palladium lost 1.12 percent to $969.75.
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