Gold prices witnessed a slight uptick on Wednesday as investors flowed back into the market after steep declines in the previous session. However, gold prices then continued their dip as the focus shifted to the upcoming U.S. inflation data, which could provide additional insight into the Federal Reserve‘s path for monetary policy.
In the UAE, gold rates gained AED1.25, with 24-carat gold rising to AED315.50 and 22-carat gold recording AED292.25. Meanwhile, 21-carat gold gained AED1.5 to AED283 while 18-carat gold reached AED242.50.
Globally, spot gold had risen to $2,610.99 earlier in the session after hitting its lowest since September 20 on Tuesday. As of 6:12 GMT, spot gold fell 0.20 percent to $2,605.93. Meanwhile, U.S. gold futures rose 0.20 percent to $2,611.60. Gold prices hit an all-time high of $2,790.15 in late October, and since then they have persisted on a downward track.
Dollar inches up
Analysts noted that the market is witnessing some bargain hunting as prices continue to fall. Gold prices have recently declined as the U.S. dollar rose to four-month highs and expectations of additional inflationary pressures from President Trump’s policies impacted the Fed’s rate cut cycle.
“The specter of inflation has not fully disappeared – especially given a Trump presidency and potential inflationary pressures from pro-growth policies and tariffs,” stated Kareena Moledina, client portfolio manager, Janus Henderson Investors.
The dollar index gained 0.06 percent to 106.09 on Wednesday, further impacting bullion as it makes the asset less attractive for holders of other currencies. Gold is traditionally considered a hedge against inflation, but higher interest rates reduce the appeal of the non-yielding asset.
Rate cut bets
At the moment, traders are pricing a 62.4 percent chance of a 25-basis-point cut during the Fed’s next meeting in 35 days and a 37.6 percent chance that the central bank will keep rates unchanged, according to the CME FedWatch tool.
In his comments, Minneapolis Fed president Neel Kashkari signaled uncertainty over interest rates, stating that any increases in inflation could see the Fed pause its rate-cutting spree. The central bank cut interest rates by a total of 75 basis points in the past two months and is expected to cut rates by 25 basis points in December. Several more Fed officials are speaking this week, most notably Chair Jerome Powell on Thursday.
Upcoming U.S. economic data
Markets currently await the release of the U.S. Consumer Price Index (CPI) data, which is due at 13:30 GMT and, if it shows the inflation trend is in line with the central bank’s target, gold prices could test the $2,650 level. However, the market expects the reading to show that inflation remained sticky in October, which bodes poorly for bets on sustained monetary easing by the Federal Reserve.
“The Fed may argue that it is not swayed by political interference – but any policy changes will undoubtedly impact the U.S. economy. The Republican dominance in government could end up being inflationary,” added Moledina.
Besides, the U.S. Producer Price index (PPI) and weekly jobless claims are due on Thursday, and retail sales data is due at the end of the week. Remarks from Fed chair Jerome Powell and other U.S. central bank officials are also on investors’ radar.
Analysts added that Trump’s plans to continue tax cuts beyond 2025 and increase spending will likely deteriorate the U.S. fiscal situation and this could pave the way for macroeconomic policy adjustments that would support gold prices.
Read: Why are gold prices falling after Donald Trump’s US election win?
Other precious metals
Amid the decline in gold prices, the precious metals market witnessed a positive movement. Spot silver gained 0.59 percent to $30.89 while platinum rose 0.39 percent to $951.40 and palladium increased by 0.58 percent to $949.90.
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