Gold prices fell on Thursday after recovering from their lowest in a month earlier in the session, while investors awaited key U.S. economic data for additional insight into the Federal Reserve’s policy outlook for next year.
In the UAE, gold rates witnessed a sharp fall, with 24-carat gold losing AED5 to AED315.75 and 22-carat gold dipping AED4.5 to AED292.5. In addition, 21-carat gold declined by AED4.5 to AED283 while 18-carat gold fell by AED3.75 to AED242.75.
Globally, spot gold lost 1.28 percent to $2,603.99 per ounce, as of 6:12 GMT, after rising over 1 percent earlier in the session. Meanwhile, U.S. gold futures dipped 1.35 percent to $2,617.59.
The dollar index increased by 0.05 percent to 108.08, making bullion less attractive for other currency holders.
Fed signals fewer rate cuts next year
Gold prices fell over 2 percent to their lowest since November 18 after the Fed lowered interest rates by 25 basis points, which was in line with expectations. With the latest announcement, the target range for the federal funds rate stands at 4.25 percent to 4.5 percent. However, investor sentiment was impacted after the central bank signaled fewer rate cuts next year.
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. Higher interest rates reduce the appeal of holding non-yielding assets like gold.
Traders are now awaiting the release of key U.S. gross domestic product data, initial jobless claims data later in the day, and core PCE data later this week for further insights into the Fed’s 2025 rate cut path.
Stock market dips
The Fed’s more hawkish comments regarding future rate cuts supported the rise in U.S. Treasury bond yields, further assisting the dollar index’s surge and placing downward pressure on gold prices.
The Fed’s dot plot indicated that officials see the Fed funds rate falling to 3.9 percent in 2025, suggesting that the Fed can cut rates by a quarter-point just twice in 2025, down from their estimate of four rate cuts in September.
The central bank’s 2025 outlook dragged stock prices down to their worst day in four months. The Dow Jones Industrial Average closed down more than 1,100 points, roughly 2.5 percent. The Nasdaq composite was hit worse, sinking about 3.5 percent on Wednesday.
Read: Crude oil prices fall 0.6 percent following Fed’s 0.25 basis point rate cut
Japan, UK to hold interest 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 is expected to hold interest rates at 4.75 percent today amid persistent inflation pressures, despite signs of a slowing economy.
Last week, the European Central Bank cut interest rates for the fourth time this year while the Swiss National Bank cut its interest rate by 50 basis points, its biggest reduction in almost 10 years. The Bank of Canada also slashed its key policy rate by 50 basis points to 3.25 percent to help address slower growth. Chile’s central bank also cut its benchmark interest rate by 25 basis points to 5 percent on Tuesday, extending an easing cycle that began last year.
Other precious metals
The precious metals market saw positive movement on Thursday amid the sharp decline in gold prices. Spot silver gained 0.28 percent to $29.44, platinum rose 0.72 percent to $925.90 and palladium surged 1.71 percent to $918.46.
