Gold prices rose on Monday after hitting a one-month low last week following the U.S. Federal Reserve’s cautious stance on interest rate cuts for 2025.
In the UAE, gold rates witnessed a marginal decline, with 24-carat gold losing AED0.25 to AED318 and 22-carat gold remaining stable at AED294.5. Meanwhile, 21-carat gold and 18-carat gold declined by AED0.25 to AED285 and AED244.25, respectively.
Globally, spot gold gained 0.15 percent to $2,627.11 per ounce, as of 6:02 GMT, after losing around 2 percent last week. Meanwhile, U.S. gold futures dipped 0.15 percent to $2,641.07.
The dollar index gained 0.10 percent to 107.73, making bullion less attractive for other currency holders.
U.S. inflation slows
The Fed’s quarter-point rate cut on December 18 and central bank officials’ cautious economic projections and expectations of fewer cuts in 2025 pushed gold prices to their lowest since November 18. As the holiday season nears and with the fall in prices last week, gold was pushed up again by short-covering which began on Friday.
On Friday, gold prices gained on softer U.S. dollar and Treasury yields after economic data signaled a slowdown in inflation. 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.
Fed’s cautious approach to policy easing
Data released last week 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.
San Francisco Fed President Mary Daly and two other policymakers said that the central bank would likely resume rate cuts next year but take its time given that the recalibration phase was over. 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.
Traders will also await Donald Trump’s incoming presidency and the initial decisions he will make which could potentially add to market volatility and be bullish for gold prices.
Geopolitical tensions persist
Russian President Vladimir Putin pledged retaliation after Ukraine staged a major drone attack on the city of Kazan which damaged residential buildings and shut down the airport. Meanwhile, tensions in the Middle East persisted, and uncertainty over Syria’s future remained.
Ongoing geopolitical risks arising from the Russia-Ukraine war 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 gold prices to multiple record highs this year, positioning bullion for its most successful year since 2010.
Other precious metals
As gold prices rose, the precious metals market saw positive movement on Monday. Spot silver gained 0.64 percent to $29.70 while platinum rose 1 percent to $935.38 and palladium gained 0.13 percent to $921.75.
