Gold prices rose on Thursday as the U.S. dollar weakened and geopolitical tensions persisted. Investor focus is now on the Federal Reserve‘s 2025 rate cut path and Donald Trump’s trade tariff policies which could determine gold’s movement next year.
In the UAE, gold rates rose, with 24-carat gold gaining AED1.25 to AED318.25 and 22-carat gold rising AED1 to AED294.5. In addition, 21-carat gold increased by AED1.25 to AED285.25 while 18-carat gold rose by AED1 to AED244.5.
Globally, spot gold gained 0.36 percent to $2,625.75 per ounce, as of 6:11 GMT. Meanwhile, U.S. gold futures rose 0.34 percent to $2,644.41. Gold prices have risen close to 26 percent this year and are set for their best performance since 2010, driven by major interest rate cuts and heightened geopolitical uncertainties.
The dollar index dipped 0.09 percent to 108.16, making bullion more attractive for other currency holders.
Dollar index hovers near two-year high
Gold prices rose as the dollar index edged lower but hovered near the two-year high it touched last week. Traders are currently awaiting the release of the U.S. jobless claims data due later in the day and bracing for major policy changes, including tariffs, deregulation and tax shifts as Trump returns to the White House in January.
Besides, markets in Australia, New Zealand, Hong Kong and the eurozone are closed on Thursday for the Boxing Day public holiday.
Last week, gold prices witnessed a sharp decline after the Fed cut interest rates and signaled fewer cuts in 2025. Investor focus now shifts to the pace at which the U.S. central bank will cut rates. While a lower-than-expected U.S. inflation reading on Friday eased some concerns about the pace of cuts next year, markets are still pricing in only around 35 basis points worth of cuts for 2025.
Following that rate cut, Fed Chair Jerome Powell said that the central bank’s policymakers want to see more progress in lowering inflation as they consider the future outlook of the monetary policy. Markets now expect the Fed to leave its benchmark overnight rate unchanged at the January 28-29 meeting, with only 8.6 percent of traders pricing a rate cut for next month, according to the CME FedWatch tool.
The Fed’s hawkish shift last week provided renewed strength to the dollar. Higher interest rates make the greenback more attractive due to increased returns on dollar-denominated assets. A stronger dollar also weighs on gold prices as it makes the yellow metal more expensive for buyers using other currencies.
Geopolitical tensions persist
Gold is traditionally a safe haven asset during geopolitical turmoil and thrives in a low interest rate environment. With the beginning of the holiday season last week, trading volumes have been lower as the end of the year approaches.
Efforts to reach a ceasefire deal in Gaza have failed so far this week, despite reports of progress recently. Amid growing uncertainty in the Middle East, gold prices may see support if tensions escalate. In addition, tensions between Russia and Ukraine escalated further on Christmas day with Russia launching a major attack on its neighboring country. Tensions in eastern Ukraine’s Pokrovsk also escalated between the two sides.
Read: Crude oil prices rise 0.2 percent on new China stimulus, U.S. inventory declines
Other precious metals
As gold prices rose, the precious metals market fell on Thursday. Spot silver declined 0.11 percent to $29.58 while platinum dipped 0.95 percent to $934.68 and palladium lost 1.34 percent to $940.71.
Among industrial metals, copper dipped 0.04 percent as the strong dollar weighed on prices. Analysts attributed the weakness in copper to seasonal sluggishness as industrial production and construction projects often slow down with businesses and projects preparing for year-end closures and holidays.
