Gold prices edged down on Monday as investors awaited the release of key U.S. economic data including the December nonfarm payrolls report for additional insight into the Federal Reserve’s outlook on interest rates.
In the UAE, gold rates dipped, with 24-carat gold losing AED0.75 to AED319.25 and 22-carat gold declining AED1 to AED295.50. Meanwhile, 21-carat gold fell AED1 to AED286 and 18-carat gold ticked down AED0.75 to AED245.25.
Globally, spot gold lost 0.21 percent to $2,635.03 as of 6:10 GMT after gaining around 1.5 percent last week. Meanwhile, U.S. gold futures fell 0.34 percent to $2,645.72.
U.S. economic data in focus
U.S. economic data this week will likely play a key role in gold’s movement. Traders are awaiting the release of the ISM Services PMI data and the U.S. jobs report, due on Friday, which could provide more hints regarding the Fed’s outlook on interest rates after it reduced its projections for cuts in 2025 last month.
Investors are also awaiting the release of ADP hiring and job openings data, in addition to the minutes of the Fed’s last policy meeting for further insights. A low interest-rate environment raises the appeal of non-yielding bullion which also serves as a hedge against geopolitical uncertainties and inflation.
Analysts noted that any downside misses in the data set this week may impact the U.S. dollar and support gold prices further. The U.S. dollar index lost 0.03 percent to 108.92, traditionally making gold more attractive for other currency holders.
Trump’s proposed policies raise inflation concerns
U.S. President-elect Donald Trump is set to return to office on January 20 and some of his proposed policies like tariffs and protectionist policies are raising market concerns regarding inflation and trade wars. This increased safe-haven flows, further supporting the rise in gold prices last week. If the dollar index continues to pull back, gold may see an additional rise.
However, Trump’s policies could also prompt the Fed to take a more cautious stance on rate cuts, limiting gold’s upside. Following three rate cuts in 2024, one of which was a large 50-basis-point cut, the Fed has projected only two reductions for 2025 due to persistent inflationary pressures.
Richmond Fed President Thomas Barkin said on Friday that the central bank’s benchmark policy rate should stay restrictive until it is more certain that inflation is returning to its 2 percent target.
The latest U.S. inflation data revealed that headline annual inflation ticked up to 2.7 percent in November from October’s 2.6 percent, while core inflation, which excludes volatile food and energy prices, remained steady at 3.3 percent. On a monthly basis, both headline and core inflation came in at 0.3 percent, which is in line with forecasts yet above the Fed’s target.
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Gold’s outlook remains positive
The yellow metal surged by 27 percent in 2024, achieving its best annual performance since 2010, driven by the Fed’s significant rate cuts from the previous year and ongoing geopolitical tensions worldwide.
Geopolitical tensions have been a major factor in gold’s surge in 2024 and are likely to continue to provide support in 2025, particularly with Trump’s administration taking office. Ongoing geopolitical risks related to the prolonged Russia-Ukraine conflict and persistent tensions in the Middle East are expected to boost gold prices in the coming year.
Record central bank purchases have also bolstered the demand for gold. A World Gold Council survey suggests that major central banks will likely increase gold purchases in 2025, further boosting demand for the precious metal and supporting the rise in its prices.
Other precious metals
Amid the decline in gold prices, spot silver fell 0.67 percent to $29.42 per ounce, platinum dipped 1.06 percent to $928.35, and palladium fell 0.79 percent to $905.75. This dip in the precious metals market comes after all three metals recorded weekly gains last week.
