Gold prices rose on Tuesday as investor focus shifted to the U.S. Federal Reserve’s policy meeting and the impact of President Donald Trump’s policies on the central bank’s future direction.
In the UAE, gold rates declined, with 24-carat gold losing AED3.5 to AED332 and 22-carat gold declining AED2.25 to AED307.5. Meanwhile, 21-carat gold fell AED2 to AED297.75 while 18-carat gold dipped AED1.5 to AED255.25.
Globally, spot gold rose 0.27 percent to $2,741.53 per ounce, as of 6:05 GMT. Gold prices fell more than 1 percent on Monday as a low-cost Chinese artificial intelligence model triggered a broad sell-off in the market. Meanwhile, U.S. gold futures gained 0.24 percent to $2,772.74.
Fed policy meeting kicks off
Fed policymakers are expected to leave interest rates steady on Wednesday, but Trump called on the central bank to lower borrowing costs further last week. With that, the Fed would have initiated the first pause in the rate-cutting cycle that began last September.
Since the Fed’s December meeting, data has maintained the core view among Fed officials that inflation will continue to move steadily towards the 2 percent target, with a low unemployment rate and continued hiring and economic growth. If central bank officials signal additional rate cuts for the year, treasury yields may decline and gold prices will likely receive additional support.
The market is pricing in the possibility that the U.S. central bank will lower borrowing costs twice by the end of this year amid signs of inflationary pressures following Trump’s inauguration.
Trump’s tariff plans raise inflationary concerns
Trump ordered his Administration to introduce emergency 25 percent tariffs on Colombian imports, but the duties were put on hold after the latter agreed to unrestricted acceptance of all illegal migrants returned from the U.S. Trump also warned that tariffs would increase to 50 percent by next week if the Latin American country refused to comply with his immigration policies, fueling trade war fears and tempering investors’ appetite for riskier assets.
In addition, Trump said on Tuesday that he would impose tariffs on producers of pharmaceuticals and computer chips soon. He added that he will place tariffs on aluminum and copper, and will look at steel and other industries for tariffs.
This revived fears that Trump’s protectionist stance would reignite inflation and assisted benchmark 10-year U.S. government bonds in moving away from over their one-month low, further supporting the U.S. dollar and weighing on gold prices.
The dollar index gained 0.47 percent to 107.84 on Tuesday, making bullion less attractive for other currency holders.
Read| Gold prices to grow modestly in 2025 following 25.5 percent surge in 2024: Report
China’s gold imports through Hong Kong fall 84 percent
Elsewhere, China’s net gold imports through Hong Kong fell 84 percent in December from the previous month, dropping to their lowest since April 2022, data showed on Monday.
However, the People’s Bank of China resumed buying after a six-month pause, adding gold to its reserves for the second straight month in December.
Central banks have been net buyers of gold for almost 15 years. Central banks, mostly from emerging markets, have remained keen buyers of gold, driven by the need for a stable and secure asset amid global economic uncertainties. The World Gold Council expects this demand to persist this year, stating that demand in excess of 500 tons should still have a net positive effect on the performance of gold prices.
Other precious metals
As gold prices rose, the precious metals market saw a downward movement on Tuesday. Spot silver fell 0.32 percent to $30.10 per ounce, platinum dipped 0.38 percent to $943.50 and palladium plummeted 0.18 percent to $959.
