Gold prices rose to a new record high on Thursday after the U.S. Federal Reserve hinted at the possibility of cutting interest rates twice this year, further increasing bullion’s appeal amid ongoing geopolitical and economic tensions.
In the UAE, gold rates recorded a notable increase, with 24-carat gold gaining AED2.25 to AED367.50 and 22-carat gold increasing by AED2 to AED340.25. Meanwhile, 21-carat gold rose AED2 to AED326.25 and 18-carat gold gained AED1.75 to AED279.75.
Globally, spot gold rose 0.62 percent to $3,052.24 per ounce, as of 5:15 GMT, after hitting an all-time high of $3,055.96 earlier in the session. Meanwhile, U.S. gold futures gained 0.65 percent to $3,060.94.
Trade tensions raise rate cut uncertainty
Gold prices are being driven by increased market uncertainty, rising geopolitical tensions, a weaker U.S. dollar, and expectations of further policy easing this year. Bullion, traditionally viewed as a safe-haven investment during times of inflation or economic volatility, has climbed over 15 percent so far this year.
The Fed held its benchmark overnight interest rate steady in the 4.25-4.50 percent range on Wednesday. Policymakers expect the central bank to deliver two quarter-percentage-point rate cuts by the end of 2025. Non-yielding assets like gold tend to thrive in a low-interest-rate environment.
The Fed also released updated economic projections yesterday, forecasting the fed funds rate to remain at 3.9 percent, unchanged from December’s projections. Other projections, like inflation and the unemployment rate, were upwardly revised. On the other hand, the Fed expected the U.S. economy to slow below the 2 percent threshold, indicating that it became slightly fragile amid Trump’s trade policies.
Following the U.S. central bank’s policy announcement, Fed Chair Jerome Powell said in a statement that U.S. President Donald Trump’s initial policies, including extensive import tariffs, appear to have tilted the U.S. economy towards slower growth and at least temporarily higher inflation. Trump’s tariffs, which have erupted trade tensions in recent months, are widely expected to increase inflation and slow economic growth.
Powell added that “uncertainty around the (economic) outlook has increased,” adding that some tariff inflation has been passed on to consumers. Powell added, “Our current policy stance is well positioned to deal with the risk and uncertainties we face.”
Geopolitical tensions resurface
In addition to the Fed keeping interest rates steady and amid growing tariff uncertainty, tensions in the Middle East have resumed, further contributing to the recent surge in gold prices. Furthermore, hostilities between Russia and Ukraine continued despite talks to achieve a 30-day ceasefire from attacking energy facilities.
So far this year, gold has recorded 16 record highs, four of which were above the $3,000 milestone.
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Other precious metals
As gold prices surged to a new record high, the precious metals market witnessed positive movement. Spot silver gained 0.26 percent to $33.89 while platinum rose 0.32 percent to $996.25. In addition, palladium recorded a marginal increase of 0.06 percent to $959.21 while copper surged 0.40 percent to $5.10.
