Gold prices were set for a weekly decline on Friday after the Federal Reserve signaled a slowdown in interest rate cuts next year following its quarter-point cut on Wednesday. Market focus now shifts to the U.S. personal consumption expenditure data due later in the day.
In the UAE, gold rates witnessed another decline, with 24-carat gold losing AED2.75 to AED314.5 and 22-carat gold dipping AED2.5 to AED291.25. In addition, 21-carat gold declined by AED2.5 to AED282 while 18-carat gold fell by AED2 to AED241.75.
Globally, spot gold gained 0.25 percent to $2,601.16 per ounce, as of 6:12 GMT, but has lost around 2 percent so far this week. Meanwhile, U.S. gold futures rose 0.26 percent to $2,614.91.
The dollar index fell 0.03 percent to 108.37, making bullion more attractive for other currency holders.
Fed’s rate cut outlook impacts investor sentiment
Gold prices rose as investors awaited the release of the core PCE data, the Fed’s preferred inflation measure, for additional insight into the U.S. economic outlook. The Fed cut rates by 25 basis points but signaled a cautious outlook regarding the monetary policy outlook for 2025, pushing gold prices to their lowest since November 18 on Wednesday.
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 largely expect the Fed to leave its benchmark overnight rate unchanged at the January 28-29 meeting, with only 10.7 percent of traders pricing a rate cut for next month, according to the CME FedWatch tool. Higher interest rates reduce the appeal of holding non-yielding assets like gold.
U.S. economy grows faster than expected
Data released on Thursday revealed that the U.S. economy grew faster than expected in the third quarter. Jobless claims also slipped more than anticipated, reinforcing expectations that the central bank will take a cautious approach to policy easing.
The U.S. Bureau of Economic Analysis reported on Thursday that the economy expanded 3.1 percent in the third quarter compared to 2.8 percent estimated previously. Other data showed that the number of Americans filing new applications for jobless benefits fell more than expected, to 220,000 for the week ended December 14.
Fed bank presidents who are slightly more hawkish will vote on the central bank’s rate-setting panel in 2025, raising the chance that any further interest rate cuts next year could spur more concern among policymakers. Higher interest rates impact the appeal of non-yielding assets like gold.
Read: Crude oil prices face weekly decline of over 2 percent amid Fed’s demand concerns
Bank of England holds rates
The Bank of Japan kept interest rates unchanged on Thursday, signaling caution among policymakers amid uncertainty over U.S. President-elect Donald Trump’s economic plans. Meanwhile, the Bank of England held interest rates at 4.75 percent amid persistent inflation pressures, despite signs of a slowing economy.
Besides, the U.S. House of Representatives failed to pass a spending bill to fund the government yesterday, raising the risk of a government shutdown at the end of the day on Friday. This comes on top of persistent geopolitical tensions and concerns about Trump’s tariff plans, which continue to drive safe-haven flows toward gold.
Other precious metals
The precious metals market saw mixed movement on Friday amid the slight recovery of gold prices. Spot silver declined 0.03 percent to $29.01 while platinum dipped 0.65 percent to $917.52. However, palladium gained 0.40 percent to $909.59.
