Gold prices witnessed minimal movement on Tuesday as investors approached metal markets with caution ahead of a series of important central bank meetings this week, particularly that of the U.S. Federal Reserve.
In the UAE, gold rates saw a slight decline, with 24-carat gold and 22-carat gold each dropping by AED0.25, settling at AED321.00 and AED297.25, respectively. Likewise, 21-carat gold decreased by AED0.25 to AED287.25, while 18-carat gold remained unchanged at AED246.75.
The yellow metal found itself in a consolidation range between $2,600 and $2,700 as traders opted to purchase dollars in anticipation of rate decisions from the Fed, the Bank of Japan, and the Bank of England this week. Spot gold edged up 0.1 percent to $2,654.99 per ounce, while February gold futures also rose 0.1 percent to $2,671.91 per ounce by 23:19 ET (04:19 GMT).
Read more: UAE, global gold prices rise ahead of Fed meeting
Fed to lead wave of rate decisions this week
The Federal Reserve is largely expected to reduce interest rates by 25 basis points at the end of its two-day meeting on Wednesday, a scenario that appears to be mostly factored into market expectations. However, the central bank’s guidance on future rate movements will be scrutinized closely, especially given the increasing belief that it will indicate a slower pace of rate cuts in the upcoming year. Recent data reflecting persistent inflation and a robust labor market have heightened caution over the Fed’s capacity to implement gradual rate reductions.
The anticipation of relatively higher U.S. interest rates has bolstered the dollar in recent trading sessions, which in turn has pressured gold prices further away from their historical peaks. Elevated rates tend to increase the opportunity cost of holding gold and other metals.
In addition to the Fed, the Bank of Japan and the Bank of England are also poised to announce their monetary policy decisions this week. The Bank of England is expected to further lower rates to support a flagging British economy, while analysts are divided on whether the Bank of Japan will increase rates again following its significant monetary policy shift earlier this year.
Other precious metals displayed muted activity. Platinum futures held steady at $941.35 per ounce, while silver futures dipped 0.3 percent to $30.955 per ounce.
Copper prices under pressure from China concerns
In the realm of industrial metals, copper prices declined on Tuesday, weighed down by apprehensions regarding sluggish economic growth in China, the leading importer. Benchmark copper futures on the London Metal Exchange fell 0.2 percent to $9,052.0 per ton, while February copper futures decreased by 0.5 percent to $4.1745 per pound. The red metal faced pressure on Monday following lackluster economic indicators from China, which suggested ongoing struggles despite a range of supportive measures from the Chinese government.
While China’s demand for copper has so far shown resilience, traders remain wary of a potential slowdown amid deteriorating conditions in the country.
Monday’s gold price movement
Gold prices saw a slight uptick on Monday as investors prepared for an anticipated interest rate cut from the Federal Reserve this week and awaited comments from policymakers to gauge the outlook for monetary policy next year. In the UAE, gold rates rose, with 24-carat gold and 22-carat gold gaining AED0.5 to AED321.25 and AED297.5, respectively. Twenty-one-carat gold also increased by AED0.5 to AED288, while 18-carat gold rose by AED0.25 to AED246.75.
Globally, spot gold increased by 0.14 percent to $2,652.63 per ounce as of 5:54 GMT, while U.S. gold futures dipped 0.22 percent to $2,669.82.
U.S. producer prices exceeded expectations in November, driven by a spike in food costs. Data released last week indicated that consumer prices rose at the fastest rate in seven months during November. According to the U.S. Bureau of Labor Statistics, the headline producer price index (PPI) climbed 0.4 percent in November, accelerating from 2.6 percent in October to 3 percent year-on-year.
Signs of rising inflation and expectations that Trump’s expansionary policies will further elevate inflation suggest that the Fed may adopt a more cautious approach toward interest rate cuts next year.
Recent central bank actions
Last week, the European Central Bank implemented its fourth interest rate cut of the year, while the Swiss National Bank reduced its rate by 50 basis points, marking its most significant cut in nearly a decade. The Bank of Canada also lowered its key policy rate by 50 basis points to 3.25 percent, aiming to address slower economic growth, which has contributed to supportive conditions for gold amid global uncertainties.
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 bullion prices to multiple record highs this year, positioning gold for its most successful year since 2010, with an increase of nearly 31 percent thus far.
