Gold prices fell on Monday as the dollar firmed, while investors awaited the Federal Reserve‘s first meeting of 2025 for more insight into the U.S. interest rate path.
In the UAE, gold rates retreated, with 24-carat gold and 22-carat gold declining AED1.5 to AED334 and AED309.25, respectively. Meanwhile, 21-carat gold fell AED1.5 to AED299.25 while 18-carat gold dipped AED1.25 to AED256.5.
Globally, spot gold lost 0.70 percent to $2,753.35 per ounce, as of 6:07 GMT. Prices rose more than 2 percent last week, rising to their highest since October 31, when they hit a record high of $2,790.15. Meanwhile, U.S. gold futures fell 0.77 percent to $2,784.99.
Dollar index gains
The U.S. dollar index gained 0.28 percent to 107.74, making bullion less attractive for other currency holders. The dollar lost over 1 percent last week, recording its worst weekly fall in two months. Gold prices started the week lower mainly due to the rise in the dollar. However, the yellow metal’s movement above the $2,750 level suggests that safe-haven demand persists, supporting gold prices in the long term.
The U.S. and Colombia pulled back from the verge of a trade war after the White House said on Monday that the country had agreed to accept military aircraft carrying deported migrants.
Trump had previously ordered his Administration to introduce emergency 25 percent tariffs on all goods coming from Colombia after the Colombian government refused to allow two U.S. military planes carrying deported migrants to land in the country. Trump also warned that tariffs would increase to 50 percent by next week if the Latin American country refused to comply with his immigration policies, fueling trade war fears and tempering investors’ appetite for riskier assets.
Gold is considered a hedge against geopolitical tensions and inflation. It also thrives in a low interest rate environment since it is non-yielding.
Fed to keep interest rates steady
Fed policymakers are largely expected to keep interest rates steady in their January 28-29 meeting, marking the first pause in the rate-cutting cycle that began in September. Market focus this week will likely be on how the Fed reacts to comments from President Trump, who has called for continued interest rate cuts.
Since the Fed’s December meeting, data has maintained the core view among Fed officials that inflation will continue to move steadily towards the 2 percent target, with a low unemployment rate and continued hiring and economic growth.
Trump said last Thursday that he would demand that interest rates drop immediately, lifting bets that the Federal Reserve would lower borrowing costs further in 2025 and dragging the U.S. Treasury bond yields lower.
Market prices two rate cuts this year
The market is pricing in the possibility that the U.S. central bank will lower borrowing costs twice by the end of this year amid signs of inflationary pressures following Trump’s inauguration.
Trump said on Friday that his conversation with Chinese President Xi Jinping was friendly and that he could reach a trade deal with China and would rather not use tariffs. This eased worries that Trump’s protectionist policies could boost inflation and supported prospects for further policy easing by the Fed, further benefiting gold prices.
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.
Read: UAE gold prices surge AED3.5, global rates hit 3-month high
Other precious metals
As gold prices declined from near their record high, the precious metals market saw a downward movement on Monday. Spot silver fell 1.05 percent to $30.28 per ounce, platinum dipped 0.51 percent to $944.20 and palladium plummeted 2.43 percent to $964.
