Gold prices edged up on Tuesday as the holiday season marked its beginning. Markets are now bracing for U.S. President-elect Donald Trump’s potential trade tariff policies and fewer rate cuts from the Federal Reserve next year.
In the UAE, gold rates declined, with 24-carat gold losing AED1.25 to AED317.25 and 22-carat gold dipping AED1 to AED293.75. In addition, 21-carat gold fell AED1 to AED284.50 and 18-carat gold declined by AED0.75 to AED243.75.
Globally, spot gold gained 0.28 percent to $2,618.74 per ounce, as of 6:13 GMT. Meanwhile, U.S. gold futures rose 0.14 percent to $2,631.76. In the past year, gold prices have gained over 27 percent, positioning bullion for its most successful year since 2010.
The dollar index gained 0.09 percent to 108.13, making bullion less attractive for other currency holders.
Fed’s policy trajectory
Gold prices witnessed a sharp decline after the Fed cut interest rates last week and signaled fewer cuts in 2025. Investor focus now shifts to the pace at which the U.S. central bank will cut rates. While a lower-than-expected U.S. inflation reading on Friday eased some concerns about the pace of cuts next year, markets are still pricing in only around 35 basis points worth of cuts for 2025.
The personal consumption expenditures (PCE) index rose 0.1 percent last month after an unrevised 0.2 percent increase in October. Inflation edged higher to 2.4 percent year-on-year in November from 2.3 percent during the same period last year. Data released last week also revealed that the U.S. economy grew faster than expected in the third quarter. Meanwhile, jobless claims slipped more than anticipated, reinforcing expectations that the central bank will take a cautious approach to policy easing.
Higher interest rates impact the appeal of non-yielding assets like bullion.
Last week, Fed Chair Jerome Powell said that the central bank’s policymakers want to see more progress in lowering inflation as they consider the future outlook of the monetary policy. Markets now expect the Fed to leave its benchmark overnight rate unchanged at the January 28-29 meeting, with only 8.6 percent of traders pricing a rate cut for next month, according to the CME FedWatch tool.
Trump’s potential trade policies raise concerns
Market focus will also be on President-elect Trump’s policies regarding trade tariffs and their impact on gold prices, the U.S. economy and the targeted trade partners. Trump previously pledged to impose big tariffs against America’s three biggest trading partners, Mexico, Canada, and China and also threatened a 100 percent tariff on ‘BRICS’ nations.
These policies could cause volatility in the market and raise trade tensions with the main trading partners, potentially raising demand for safe-haven gold.
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 in 14 years.
Read: Oil prices rise 0.4 percent amid U.S. shutdown relief, positive inflation trends
Other precious metals
As gold prices rose, the precious metals market continued to see positive movement on Tuesday. Spot silver gained 0.25 percent to $29.72 while platinum rose 0.07 percent to $939.91 and palladium gained 0.72 percent to $936.55.
