Gold prices eased on Friday, hovering near the $2,700 level as traders assessed the U.S. interest rate outlook following the Federal Reserve‘s rate cut and the election of Donald Trump as president.
In the UAE, gold rates recovered some of the previous session’s significant losses, with 24-carat gold gaining AED3.50 to AED326.25 while 22-carat gold increased by AED3.25 to AED302. In addition, 21-carat gold gained AED3 to AED292.25, and 18-carat gold inched up AED2.5 to AED250.50.
Globally, spot gold edged down 0.21 percent to $2,692.2 per ounce, as of 6:12 GMT, while December gold futures fell 0.24 percent to $2,699.40 per ounce. Gold prices hit an all-time high of $2,790.15 last week and have lost close to $100 since then.
Stronger dollar pressures bullion
Gold prices continued to decline as the U.S. dollar index was set for a slight weekly gain after Trump’s election victory. A stronger dollar makes gold less attractive for other currency holders. Markets are slightly recovering from the political uncertainty surrounding the U.S. election but remain pressured amid economic and policy-related developments.
Despite the factors impacting gold prices, their long-term outlook remains positive amid the ongoing interest rate cut cycle and persistent geopolitical tensions. Gold maintains its status as a hedge against political and economic uncertainty. Moreover, it benefits from a low-interest-rate environment as investors lean toward more non-yielding assets.
Federal Reserve cuts rates
At the end of its two-day policy meeting on Thursday, the Federal Reserve cut interest rates by 25 basis points, in line with market expectations. According to the CME FedWatch tool, markets expected a 97.5 percent chance of a 25-basis-point cut on Thursday, which would have been the second U.S. rate reduction of the year.
However, Fed chair Jerome Powell indicated a careful and measured approach to any future rate cuts. Traders now see a 71 percent chance of another quarter-point rate cut in December as they await the third potential reduction this year.
In the long term, the outlook for gold prices remains bullish. However, analysts note that gold prices may decline to the $2,620-$2,520 range in the short term if the downward trend persists.
In his comments yesterday, Powell added that the Fed will continue assessing data to determine the “pace and destination” of interest rates. This comes as officials reset the currently tight monetary policy to account for inflation that has slowed significantly in the past year and is nearing the central bank’s 2 percent target.
China stimulus measures
Meanwhile, global physically-backed gold exchange-traded funds (ETFs) saw inflows for the sixth month in a row in October, according to the World Gold Council (WGC). Elsewhere, Beijing is wrapping up a key five-day meeting later in the day, which investors are closely watching for more details on economic stimulus measures.
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Other precious metals
Amid the decline in gold prices, the precious metals market saw negative momentum with spot silver falling 0.84 percent to $31.73 per ounce and platinum declining 0.58 percent to $991.45. Meanwhile, palladium slipped 1.07 percent to $1,013.50. All three metals were down for the third straight session.
Among industrial metals, copper prices witnessed a volatile week, falling sharply as Trump signaled more economic pressure on China, the world’s biggest copper importer. Following his election, copper recovered. Copper declined 0.49 percent to $4.39 ahead of the China National People’s Congress meeting results with markets expecting additional stimulus measures.
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