Gold prices rose on Tuesday as investors awaited the release of key U.S. inflation data that will provide additional insight into the Federal Reserve’s rate cut outlook. Market uncertainty rose as U.S. President-elect Donald Trump gears up to take office next week and implement major policy plans that could raise inflation.
In the UAE, gold rates edged down, with 24-carat gold and 22-carat gold losing AED1.25 to AED323.75 and AED299.75, respectively. Meanwhile, 21-carat gold and 18-carat gold fell AED1 to AED290.25 and AED248.75, respectively.
Globally, spot gold rose 0.32 percent to $2,667.98 as of 6:15 GMT. Meanwhile, U.S. gold futures gained 0.19 percent to $2,683.59.
The U.S. dollar index fell 0.32 percent to 109.60, remaining near its two-year peak.
U.S. inflation data in focus
Gold prices fell around 1 percent on Monday as robust U.S. jobs data released last week boosted the dollar. The jobs report also restated the Fed’s cautious stance on rate cuts this year as concerns grew that Trump’s tariff plans could fuel inflation.
A survey by the New York Fed revealed that U.S. consumers’ outlook on the projected path of inflation was mixed last month. Investors now await the release of the producer price index (PPI) report later in the day and the U.S. consumer price index (CPI) data on Wednesday for additional insights into the economy and the Fed’s 2025 rate cut trajectory. Several Fed officials are also due to speak this week.
Bullion is used as a hedge against inflation but higher interest rates reduce the non-yielding asset’s appeal.
Trump’s tariff plans
Reports that Trump’s top economic advisers are considering a slow increase in tariffs to prevent a sudden spike in inflation triggered a modest pullback in the U.S. Treasury bond yields and dollar, benefitting gold prices.
Investors now await Donald Trump to take office on January 20. The minutes from the central bank‘s December meeting indicated that officials are concerned about inflationary pressures stemming from protectionist and expansionary policies under Trump, with uncertainty surrounding his plans expected to heighten as his inauguration approaches.
Last week, Trump denied the news that his administration would pursue a less aggressive tariff policy and target certain sectors critical to U.S. national or economic security. Trump’s proposed tariffs and protectionist policies are expected to accelerate inflation and disrupt global trade, offering support to safe-haven assets like gold. However, these policies could also prompt the Fed to take a more cautious stance on rate cuts, limiting an upside in gold prices.
Geopolitical tensions to subside
Trump repeatedly promised to end the conflict in Ukraine and said that he will meet Russian President Vladimir Putin soon after he takes office next week. The U.S. also indicated that a ceasefire deal for Gaza is near.
Last week, Trump hinted at the possibility of escalating geopolitical tensions in the Middle East once he takes office, which will likely further raise safe-haven demand for gold. However, geopolitical tensions in both the Middle East and Ukraine will likely subside once the new president comes into office, limiting the safe-haven appeal of gold.
Geopolitical tensions have been a major factor in gold’s surge in 2024. Risks stemming from the Russia-Ukraine war and tensions in the Middle East continue to drive flows toward the precious metal.
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Other precious metals
As gold prices rose, the precious metals market witnessed positive movement on Tuesday. Spot silver gained 0.04 percent to $29.61 per ounce while platinum rose 0.41 percent to $957.68 and palladium increased by 0.50 percent to $943.43.
