Gold prices rose on Tuesday as the dollar weakened further following U.S. President Donald Trump’s inauguration, with markets gauging the possible impact of his policies on the Federal Reserve’s interest rate cut path.
In the UAE, gold rates rose, with 24-carat gold gaining AED2.5 to AED330.25 and 22-carat gold rising AED2.25 to AED305.75. Meanwhile, 21-carat gold increased by AED2.25 to AED296 and 18-carat gold gained AED2 to AED253.75.
Globally, spot gold rose 0.66 percent to $2,726.61 per ounce, as of 6:09 GMT. Meanwhile, U.S. gold futures gained 0.46 percent to $2,744.30.
The U.S. dollar index lost 0.82 percent to 108.45 following reports suggesting that any new taxes in the U.S. would be imposed in a “measured” way, making bullion more attractive for other currency holders.
Trump’s tariff policies in focus
Gold prices rose as risk sentiment eased after Trump announced no orders regarding tariffs on his first day in office. The gradual approach to taxes and tariffs weighed on the U.S. dollar and further supported bullion which rose for the second session straight today.
After weeks of global speculation regarding Trump imposing tariffs on his first day in office, news that he would take more time on tariffs drove relief among investors and pressured the U.S. dollar. Trump had previously proposed tariffs of up to 10 percent on global imports, 60 percent on Chinese goods, and a 25 percent import tariff increase on Canadian and Mexican products.
“Market participants are cautious about the prospect of sweeping tariffs and subsequent trade wars under the Trump administration. This has the potential to revive inflationary pressures, which is negative for gold. On the other hand, heightened global uncertainty and geopolitical tensions sparked by Trump’s policies could equally trigger a flight to safety,” stated Vijay Valecha, chief investment officer, Century Financial.
However, Trump declared a national emergency on energy to fill up strategic reserves and export American oil, and at the southern border to overhaul immigration policies.
The dollar weakened to a nine-day low of 107.95 during the inauguration speech, before matching those earlier losses and recovering above the 108.00 level today.
Fed rate cut trajectory uncertain
While gold is traditionally viewed as an inflation hedge, Trump’s policies are seen as inflationary which could lead the Federal Reserve to maintain higher interest rates, affecting gold’s appeal. The rate at which the incoming administration implements Trump’s policy pledges will significantly influence the future direction of U.S. interest rates.
Gold prices registered gains for the third consecutive week last week amid bets that the Federal Reserve may cut interest rates further in 2025. Market expectations were lifted by the U.S. producer price index and consumer price index, which indicated that inflationary pressures in the U.S. eased in December.
Fed Governor Christopher Waller said last Thursday that inflation is likely to continue to ease which will allow the U.S. central bank to cut interest rates sooner and faster than expected. Waller said three or four rate cuts are still possible this year if U.S. economic data weakens further.
“Amidst all this volatility, a key catalyst driving gold higher is central bank purchases. 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. By contrast, Kazakhstan’s central bank announced it would sell bullion on the international markets to shore up its domestic currency,” added Valecha.
Read: Bitcoin hits new record high of $109,588 ahead of Trump’s inauguration
Other precious metals
The precious metals market witnessed a mixed movement on Tuesday as gold prices rose. Spot silver gained 0.48 percent to $30.64 per ounce while platinum lost 0.11 percent to $941.45 and palladium fell 0.78 percent to $937.55.
