Gold prices dipped on Monday after a stronger-than-expected U.S. jobs report on Friday reinforced expectations that the Federal Reserve will remain cautious with interest rate cuts this year.
In the UAE, gold rates edged down, with 24-carat gold and 22-carat gold losing AED0.75 to AED325.25 and AED301, respectively. Meanwhile, 21-carat gold lost AED0.5 to AED291.50 and 18-carat gold fell AED0.75 to AED249.75.
Globally, spot gold fell 0.05 percent to $2,687.96 as of 6:11 GMT. Meanwhile, U.S. gold futures declined 0.03 percent to $2,714.20.
The U.S. dollar index gained 0.17 percent to 109.83, surging over its two-year peak and making bullion less attractive for other currency holders.
Dollar surges over two-year high
An unexpectedly strong nonfarm payrolls report on Friday signaled a resilient U.S. economy and supported the Fed’s cautious approach to policy easing this year, impacting gold prices. The U.S. Bureau of Labor Statistics reported on Friday that nonfarm payrolls rose by 256,000 in December, well above the 212,000 in the previous month and market expectations for a reading of 160,000.
The report also showed that the unemployment rate unexpectedly ticked lower to 4.1 percent from 4.2 percent and annual wage inflation declined to 3.9 percent.
This data comes on top of the Fed’s hawkish shift in December and dampens hopes for further interest rate cuts by the U.S. central bank, pushing the U.S. Treasury bond yields and the dollar higher. The dollar index surged to over a two-year high while the yield on the benchmark 10-year U.S. government bond rose to its highest level since late 2023.
Market focus is now on monthly U.S. inflation data, due later this week, and comments by several Fed officials for any signs of economic weakening which could lift hopes for a rate cut and further support gold prices.
Traders now expect the Fed to hold interest rates at its meeting later this month and expect only one rate cut this year, in June. Bullion is considered a hedge against inflation but higher interest rates reduce the non-yielding asset’s appeal.
Trump to take office next week
Investors are also waiting for Donald Trump to take office on January 20. The minutes from the central bank‘s December meeting indicated that officials are concerned about inflationary pressures stemming from protectionist and expansionary policies under Trump, with uncertainty surrounding his plans expected to heighten as his inauguration approaches.
Last week, Trump denied the news that his administration would pursue a less aggressive tariff policy and target certain sectors critical to U.S. national or economic security. Trump’s proposed tariffs and protectionist policies are expected to accelerate inflation and disrupt global trade, offering support to safe-haven assets like gold. However, these policies could also prompt the Fed to take a more cautious stance on rate cuts, limiting an upside in gold prices.
Trump also hinted at the possibility of escalating geopolitical tensions in the Middle East once he takes office, which will likely further raise safe-haven demand for gold. Geopolitical tensions have been a major factor in gold’s surge in 2024 and are likely to continue to provide support in 2025. Risks stemming from the Russia-Ukraine war and tensions in the Middle East continue to drive flows toward the precious metal.
The Office of Foreign Assets Control said on Friday that the U.S. and the U.K. administration imposed tougher sanctions against Russia’s oil industry, targeting nearly 200 vessels of the so-called shadow fleet.
Read: PIF invests $200 million in first globally listed Saudi ETF
Other precious metals
The precious metals market witnessed a downward movement as gold prices fell on Monday. Spot silver lost 1.01 percent to $30.09 per ounce while platinum fell 0.52 percent to $959.88 and palladium dipped 0.28 percent to $945.25.
