Gold prices edged down on Wednesday as U.S. Treasury yields and the U.S. dollar rose following economic data that suggested a slower pace of interest rate cuts this year by the Federal Reserve.
In the UAE, gold rates increased AED0.5, with 24-carat gold rising to AED320.50 and 22-carat gold reaching AED296.75. Meanwhile, 21-carat gold increased to AED287.25 and 18-carat gold ticked up to AED246.25.
Globally, spot gold dipped 0.05 percent to $2,649.54 as of 6:11 GMT. Meanwhile, U.S. gold futures fell 0.06 percent to $2,663.82.
The U.S. dollar index gained 0.03 percent to 108.57, making bullion less attractive for other currency holders.
Stronger dollar impacts bullion
Gold prices declined as the U.S. dollar firmed on hopes that monetary policy will likely remain steady for most of 2025. In addition, the benchmark 10-year Treasury yield hit an eight-month high after data on Tuesday.
U.S. job openings unexpectedly increased in November but hiring slowed, suggesting that the labor market continued to soften at a pace that does not require the Fed to cut interest rates immediately. The Job Openings and Labor Turnover Survey from the Labor Department on Tuesday revealed that job openings increased to 8.098 million in November, up from 7.839 million in October.
Atlanta Fed President Raphael Bostic said that the central bank should be cautious with policy decisions amid the uneven progress on lowering inflation.
Markets currently expect the Fed to cut rates only once this year, down from previous forecasts of two cuts, according to the CME FedWatch tool. Higher interest rates reduce the appeal of non-yielding assets like gold.
Investors are now awaiting the release of the U.S. nonfarm payrolls data on Friday for additional insight into the Fed’s policy outlook for this year. The market is also awaiting the release of the ADP employment report and the minutes from the Fed’s December meeting, due later in the day. Any softness in U.S. economic data this week could raise hopes for additional rate cuts by the Fed which may offer support to gold prices.
China raises gold reserves
China, the world’s top consumer of gold, increased its gold reserves in December for the second month in a row, according to official data from the People’s Bank of China.
Central banks around the world continued to play a leading role in the demand for gold last year. November was a solid month of gold buying as central banks collectively added a net 53 tons to global official holdings, according to the latest data from the World Gold Council.
Central banks will likely continue raising their reserves this year, further supporting gold prices. China’s contribution to the gold market will also remain a key driver, particularly amid economic growth, which will likely raise both consumer and investor demand.
Trump’s tariff policy to impact rate cut prospects
US President-elect Donald Trump denied news that his administration will 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. 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.
Trump also 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. Geopolitical tensions have been a major factor in gold’s surge in 2024 and are likely to continue to provide support in 2025. Risks stemming from the Russia-Ukraine war and tensions in the Middle East continue to drive flows toward the precious metal.
Read: Oil prices rise to $77.41 amid 4 million barrels drop in U.S. inventories
Other precious metals
The precious metals market witnessed mixed movement as gold prices declined on Wednesday. Spot silver gained 0.32 percent to $30.11 per ounce while platinum fell 0.38 percent to $947.03 and palladium dipped 0.14 percent to $924.25.
