Gold prices saw a marginal increase on Wednesday as the market awaited the Federal Reserve‘s monetary policy decision later in the day and insights into the policy trajectory for 2025.
In the UAE, gold rates gained AED0.25, with 24-carat gold reaching AED320.25 and 22-carat gold increasing to AED296.5. In addition, 21-carat gold rose to AED287 and 18-carat gold reached AED246.
Globally, spot gold gained 0.04 percent to $2,647.58 per ounce, as of 5:54 GMT, while U.S. gold futures rose 0.04 percent to $2,663.14.
The dollar index fell 0.06 percent to 106.90, making bullion more attractive for other currency holders.
Market awaits Fed’s outlook
Gold prices rose as the U.S. central bank commenced its two-day policy meeting on Tuesday which is largely expected to end with a 25-basis point cut. Therefore, the market’s focus is on the bank’s economic projections for next year and the dot plot which may offer additional insights into the monetary policy trajectory.
Traders are currently pricing a 95.4 percent chance of a quarter-point cut today, according to the CME FedWatch tool. However, around 80 percent of them expect the Fed to keep rates unchanged next month.
U.S. retail sales increased more than expected in November, adding to higher inflation readings in recent months and suggesting that the central bank could pause its easing cycle in January.
The U.S. Census Bureau reported on Tuesday that retail sales jumped 0.7 percent in November, better than market expectations of a 0.5 percent increase and stronger than the 0.4 percent increase recorded in the previous month. The data was consistent with strong underlying momentum in the economy but had little impact on bets that the Fed would cut interest rates at the end of a two-day meeting today.
Analysts noted that gold prices may see an uptick after the Fed’s announcement as a low interest rate environment supports non-yielding assets like gold.
Central banks cut interest rates
Last week, the European Central Bank cut interest rates for the fourth time this year while the Swiss National Bank cut its interest rate by 50 basis points, its biggest reduction in almost 10 years. The Bank of Canada also slashed its key policy rate by 50 basis points to 3.25 percent to help address slower growth, further supporting gold prices amid global uncertainties. Chile’s central bank also cut its benchmark interest rate by 25 basis points to 5 percent on Tuesday, extending an easing cycle that began last year.
Market focus will now be on the Bank of Japan, Bank of England, Riksbank and Norges Bank which are expected to deliver their policy verdicts later this week. Analysts expect the Bank of England to lower rates further to support the flagging British economy but are uncertain on whether the Bank of Japan will increase rates again following its significant monetary policy shift earlier this year.
Read: Crude oil prices fall ahead of Fed meeting amid weak Chinese economic data
Geopolitical risks persist
Ongoing geopolitical risks arising from the Russia-Ukraine conflict and tensions in the Middle East, coupled with concerns regarding Trump’s tariff strategies, have heightened safe-haven demand for gold. Additionally, central bank purchases and monetary policy easing have driven gold prices to multiple record highs this year, positioning bullion for its most successful year since 2010, with an increase of nearly 30 percent thus far.
Ukraine claimed a blast in Moscow that killed the head of the Russian military’s nuclear and chemical weapons protection forces on Tuesday, raising the risk of a further escalation of tensions. In the Middle East, the UN’s special envoy for Syria warned that the conflict has not ended even after the ousting of President Bashar al-Assad amid clashes in the north.
Other precious metals
As gold prices rose, the precious metals market saw mixed movement on Wednesday. Spot silver fell 0.24 percent to $30.46 while platinum rose 0.01 percent to $938.70 and palladium gained 0.11 percent to $935.74.
