Gold prices rose on Tuesday as traders awaited the release of additional U.S. economic data to gain insight into the Federal Reserve’s interest rate outlook for the year.
In the UAE, gold rates edged up, with 24-carat gold gaining AED0.75 to AED319.50 and 22-carat gold rising AED0.5 to AED295.75. Meanwhile, 21-carat gold increased by AED0.5 to AED286.25 and 18-carat gold ticked up AED0.25 to AED245.25.
Globally, spot gold rose 0.27 percent to $2,645.48 as of 6:10 GMT. Meanwhile, U.S. gold futures gained 0.29 percent to $2,655.09.
The U.S. dollar index dipped 0.08 percent to 108.17, making bullion more attractive for other currency holders.
Market awaits job openings data
Gold prices have stabilized recently around the $2,600 level, supported by a decline in the U.S. dollar. However, higher U.S. Treasury yields will likely continue impacting bullion’s rise. The benchmark 10-year Treasury yield hit its highest since May 2024 yesterday following conflicting reports about how aggressive U.S. President-elect Donald Trump’s tariff plans could be when he takes office on January 20.
Investor focus now shifts to the job openings data later in the day, ADP employment data and minutes from the Fed’s December meeting on Wednesday. They are also looking to the U.S. jobs report on Friday which may provide additional insight into the Fed’s policy path.
Fed rate cut prospects
The Fed’s projections in December implied a shift to a more cautious pace of rate cuts in 2025, with the majority of the policymakers expressing concern about rising inflation.
San Francisco Fed President Mary Daly said on Saturday that despite significant progress in lowering price pressures over the past two years, inflation remains uncomfortably above the 2 percent target. In addition, Fed Governor Lisa Cook said on Monday that policymakers could be more cautious with further interest rate cuts, citing labor market resilience and still stickier inflation.
Gold is considered a hedge against inflation, but high interest rates reduce the non-yielding asset’s appeal.
Trump’s proposed tariffs
US President-elect Donald Trump’s proposed tariffs and protectionist policies are expected to accelerate inflation and disrupt global trade, offering support to the safe-haven assets like gold.
However, Trump’s policies could also prompt the Fed to take a more cautious stance on rate cuts, limiting gold’s upside. Following three rate cuts in 2024, one of which was a large 50-basis-point cut, the Fed has projected only two reductions for 2025 due to persistent inflationary pressures.
Geopolitical tensions have been a major factor in gold’s surge in 2024 and are likely to continue to provide support in 2025, particularly with Trump’s administration taking office. Risks stemming from the protracted Russia-Ukraine war and tensions in the Middle East are still driving some haven flows toward the precious metal.
Read| Gold prices to grow modestly in 2025 following 25.5 percent surge in 2024: Report
Other precious metals
As gold prices rose, the precious metals market witnessed positive movement. Spot silver gained 0.71 percent to $30.16 per ounce, platinum rose 0.63 percent to $939.05, and palladium increased by 0.42 percent to $924.42.
