Gold prices fell on Thursday from almost a three-month peak as the dollar rose, while investors awaited additional insights into U.S. President Donald Trump’s policy direction regarding trade.
In the UAE, gold rates declined, with 24-carat gold losing AED1.25 to AED333.25 and 22-carat gold dipping AED1 to AED308.5. Meanwhile, 21-carat gold and 18-carat gold declined AED1 to AED298.75 and AED256, respectively.
Globally, spot gold fell 0.21 percent to $2,752.98 per ounce, as of 6:09 GMT. Prices rose to $2,763.43 on Wednesday, their highest since October 31 when they hit a record high of $2,790.15. Meanwhile, U.S. gold futures declined 0.34 percent to $2,761.49.
The U.S. dollar index gained 0.13 percent to 108.31, making bullion less attractive for other currency holders.
Stronger dollar pressures gold prices
Gold prices witnessed a slight pullback as the dollar strengthened. However, the precious metal’s outlook remains positive amid uncertainty surrounding the new administration’s policies. Trump had previously proposed tariffs of up to 10 percent on global imports, 60 percent on Chinese goods, and a 25 percent import tariff increase on Canadian and Mexican products.
He also vowed to hit the European Union with tariffs and said his administration was discussing a 10 percent tariff on goods imported from China starting February 1.
The impact of Trump’s policies on gold prices depends on the pace at which his administration implements tax cuts, deregulation, tariffs and deportation, which are considered inflationary.
Higher inflation impacts the Federal Reserve’s current rate-cutting cycle and high interest rates impact the appeal of non-yielding assets like gold.
Fed to cut rates twice this year
The Fed is meeting next week against a backdrop of continued economic growth and declining inflation. However, the U.S. central bank faces mounting uncertainties from Trump’s proposed policies, which analysts see as inflationary.
The Fed is expected to hold its benchmark interest rate steady at its next policy meeting on January 28-29. However, investors are still pricing in the possibility that the U.S. central bank will lower borrowing costs at least two times by the end of this year. This might cap the upside for the U.S. bond yields and the greenback, further supporting gold prices.
Investors will look forward to Trump’s speech at the World Economic Forum for more concrete announcements on tariffs. In addition, they will await the release of the U.S. weekly jobless claims which will likely boost gold prices.
Japan to raise interest rates
Elsewhere, the Bank of Japan is scheduled to announce its decision at the end of a two-day policy meeting on Friday and is expected to raise interest rates from 0.25 percent to 0.50 percent, the highest since the 2008 global financial crisis.
Rate decisions from the Fed and European Central Bank are also scheduled for Wednesday and Thursday next week, respectively, which could add volatility and provide some support to gold prices. European Central Bank policymakers backed a rate cut this month, indicating that next week’s reduction is imminent.
Read: Oil prices dip to $79.24 amid Trump’s push for increased energy production
Other precious metals
As gold prices declined, the precious metals market witnessed a downward movement on Thursday. Spot silver fell 0.56 percent to $30.62 per ounce, platinum dipped 0.15 percent to $944.35 and palladium lost 0.67 percent to $970.99.
