Gold prices inched up on Friday and were set for a weekly gain after top consumer China resumed gold purchases and expectations for an interest rate cut by the Federal Reserve at its December 17-18 meeting rose.
In the UAE, gold rates fell, with 24-carat gold losing AED3.25 to AED325.5 and 22-carat gold dipping AED3.25 to AED301.25. Additionally, 21-carat gold declined by AED3 to AED291.75 while 18-carat gold lost AED2.75 to AED250.
Globally, spot gold gained 0.08 percent to $2,686.58 per ounce, as of 6:15 GMT, after hitting its highest level since November 6 at $2,725.79 in the previous session. Bullion is set for a weekly gain of over 2 percent so far this week. Gold prices hit an all-time high of $2,790.15 in late October.
Meanwhile, U.S. gold futures fell 0.06 percent to $2,707.82.
Fed rate cut decision in focus
In five days, the Federal Reserve will meet to decide on whether to cut interest rates this month. According to the CME FedWatch Tool, traders are pricing a 96.4 percent chance of a 25-basis-point cut next week.
In the absence of any major surprise from the latest U.S. consumer inflation figures released on Wednesday, the markets now seem to have fully priced in a 25 basis points Fed rate cut move next week. Gold prices fell more than 1 percent on Thursday on profit-taking after the bullion briefly hit a five-week high earlier in the session.
U.S. producer prices rose more than expected in November amid a surge in the cost of food. Data on Wednesday showed that consumer prices increased by the most in seven months in November, raising bets of an interest rate cut. The U.S. Bureau of Labor Statistics revealed on Thursday that the headline producer price index (PPI) rose 0.4 percent in November and accelerated from 2.6 percent in October to 3 percent during the month on an annual basis.
Signs of rising inflation in addition to expectations that U.S. President-elect Donald Trump’s expansionary policies will boost inflation suggest that the Fed may adopt a more cautious stance on cutting interest rates next year. Expectations for a less dovish Fed continue to support U.S. Treasury bond yields and the dollar index, which gained 0.15 to 107.12, making gold prices more expensive for other currency holders.
Investors will now await the crucial FOMC policy decision next week for insight into the interest rate outlook next year.
Central banks cut rates
The European Central Bank cut interest rates for the fourth time this year while the Swiss National Bank cut its interest rate by 50 basis points, its biggest reduction in almost 10 years on Thursday. The Bank of Canada also slashed its key policy rate by 50 basis points to 3.25 percent on Wednesday to help address slower growth.
Gold prices thrive in a low-interest-rate environment and bullion’s appeal rises amid escalating geopolitical tensions.
Read: Oil prices dip amid supply surplus expectations and China’s stimulus efforts
Geopolitical tensions support gold
Persistent geopolitical risks stemming from the Russia-Ukraine war and tensions in the Middle East, along with concerns over U.S. President-elect Donald Trump’s tariff plans, continue to boost safe-haven demand. In addition, central bank buying and monetary policy easing has propelled bullion to multiple record highs this year, placing it on track for its best year since 2010, with almost a 33 percent increase so far.
Ukraine fired U.S.-supplied missiles, targeting strategic sites in Russia. Meanwhile, Russian forces edged closer to a key eastern Ukraine city Pokrovsk after monthlong intense fighting. In the Middle East, uncertainty regarding Syria’s stability persisted.
Other precious metals
As gold prices rose, the precious metals market saw mixed movement on Friday. Spot silver fell 0.08 percent to $30.94 while platinum rose 0.32 percent to $933.20 and palladium declined by 0.16 percent to $968.42.
