Gold prices were largely stable on Thursday after hitting their highest level in over a month following the release of softer U.S. core inflation data which raised hopes for additional rate cuts this year. However, the announcement of a ceasefire deal between Israel and Hamas capped further gains.
In the UAE, gold rates rose, with 24-carat gold and 22-carat gold gaining AED1.5 to AED326.75 and AED302.50, respectively. In addition, 21-carat gold and 18-carat gold edged up AED1.25 to AED292.75 and AED251, respectively.
Globally, spot gold rose 0.01 percent to $2,694.78 as of 6:10 GMT, after hitting its highest level since December 12 earlier in the session. Meanwhile, U.S. gold futures gained 0.26 percent to $2,724.99.
The U.S. dollar index rose 0.07 percent to 109.17, traditionally making bullion less attractive for other currency holders.
Fed rate cut hopes renewed on softer inflation
Easing underlying inflation in the U.S. renewed hopes of a less restrictive Fed policy this year, propelling gold prices to a one-month high. Core inflation unexpectedly slowed, while headline consumer prices showed no significant upside surprises.
The U.S. Bureau of Labor Statistics reported that the headline CPI rose 0.4 percent in December and the yearly rate accelerated to 2.9 percent from 2.7 percent in the previous month. Meanwhile, core inflation, which excludes volatile food and energy prices, rose 3.2 percent year-on-year compared to the 3.3 percent increase in November.
The inflation data supported bullion demand as progress in disinflation could prompt the U.S. central bank to ease monetary policy, reducing the opportunity cost of holding non-yielding assets. Markets were quick to react and now expect the Fed to deliver 40 basis points of rate cuts by year-end, compared to around 31 basis points before the release of the data.
Despite the positive data, investors remained convinced that the Fed will pause its rate-cutting cycle later this year, which helped revive dollar demand and contributed to capping gold prices. Richmond Fed President Tom Barkin said that fresh inflation data show progress on lowering inflation to the central bank’s 2 percent goal but added that rates should remain restrictive.
Trump’s tariff policy concerns persist
With President-elect Donald Trump set to begin his second term next week, the focus remains on his policies that are expected to fuel inflation. Concerns over Trump’s tariff policy heightened as his inauguration approached despite reports that his top economic advisers are considering a slow increase in tariffs to prevent a sudden spike in inflation.
Trump previously pledged to impose big tariffs against America’s three biggest trading partners, Mexico, Canada, and China and also threatened a 100 percent tariff on ‘BRICS’ nations. These policies could cause volatility in the market and raise trade tensions with the main trading partners, potentially raising demand for safe-haven gold. However, these policies could also prompt the Fed to take a more cautious stance on rate cuts, limiting an upside in gold prices.
Central bank officials said that the data released on Wednesday showed U.S. inflation was continuing, noting heightened uncertainty in the coming months as they await a first glimpse of the incoming Trump administration’s policies.
Mideast tensions ease
Qatar’s Prime Minister said on Wednesday that Israel and Hamas agreed to a ceasefire in Gaza and exchange Israeli hostages for Palestinian prisoners after 15 months of war, capping gains in gold prices. In times of heightened geopolitical tensions, gold is seen as a safe-haven investment and a hedge against inflation.
Elsewhere, Ukraine carried out its most massive attack, targeting military and oil facilities deep inside Russia. In response, Russia launched a response, predominantly targeting Ukraine’s gas infrastructure and energy facilities.
Read| Global markets to trade with considerable volatility as Trump takes office: Saxo Bank
Other precious metals
The precious metals market witnessed a downward movement on Thursday as gold prices largely held steady. Spot silver lost 0.05 percent to $30.65 per ounce while platinum declined 0.28 percent to $935.60 and palladium dipped 1.06 percent to $950.75.
