Gold prices hit a new record high on Friday and were set for their best month since March 2024 as investors increasingly sought safe-haven assets due to heightened U.S. tariff concerns. Investors were also awaiting a key inflation report due later in the day for further direction on the Federal Reserve’s next moves.
In the UAE, gold rates rose, with 24-carat gold gaining AED2.5 to AED338.5 and 22-carat gold rising AED2.25 to AED313.5. Meanwhile, 21-carat gold increased by AED2.25 to AED303.5 and 18-carat gold ticked up AED1.75 to AED260.
Globally, spot gold fell a marginal 0.04 percent to $2,795.47 per ounce, as of 6:07 GMT, but has gained over 6 percent this month. Earlier in the session, prices hit an all-time high of $2,799.71.
Meanwhile, U.S. gold futures rose 0.04 percent to $2,846.27.
Trade tariffs raise safe-haven demand for gold
U.S. President Donald Trump said on Thursday that his administration would impose a 25 percent tariff on imports from Mexico and Canada, repeating his warning to the two countries. Trump also warned of potential 100 percent tariffs if BRICS attempts to replace the U.S. dollar.
Constant trade tariff threats have continued to support safe-haven demand for gold, further supporting the metal’s prices. Expectations that Trump’s protectionist policies would boost inflation further benefitted the precious metal’s status as a hedge against rising price pressures.
Gold prices will likely see further gains if the Trump administration imposes the tariffs on the largest trading partners. Analysts noted that prices may surpass the $2,800 level amid market volatility.
Inflation data in focus
In addition, any downside surprise in the inflation data may raise hopes for greater policy flexibility by the Fed, potentially raising rate cut expectations and providing further support for gold prices.
The market awaits the release of the December U.S. personal consumption expenditures (PCE) report, due at 1330 GMT, for further clues on the interest rate trajectory. On Wednesday, Fed Chair Jerome Powell said inflation and jobs data would determine when another easing would come.
The U.S. central bank decided to keep policy unchanged at the end of a two-day meeting on Wednesday and signaled that there would be no rush to lower borrowing costs until inflation and jobs data made it appropriate.
Following the Fed’s first rate cut pause since September, the market expects the U.S. central bank to stay cautious when it comes to policy easing. Higher interest rates reduce the appeal of non-yielding assets like gold.
The Fed’s first pause since the start of its easing cycle in September and officials’ relatively hawkish stance triggered a modest rise in U.S. Treasury bond yields. This assisted the U.S. dollar in preserving its weekly recovery gains and prevented a meaningful upside in gold prices. The U.S. dollar index gained 0.38 percent to 108.21, making bullion less attractive for other currency holders after it hit its new high.
Moreover, the U.S. Bureau of Economic Analysis reported yesterday that the economy grew at an annualized rate of 2.3 percent during the October-December period. The reading marked a notable slowdown from the 3.1 percent expansion recorded in the previous quarter and was below the market expectation of 2.6 percent, which further boosted demand for gold prices.
Read: UAE gold prices gain AED0.25, global rates rise ahead of key U.S. inflation data
Other precious metals
As gold prices surged to a new high, the precious metals market saw mixed movement on Friday. Spot silver fell 0.71 percent to $31.44 per ounce, while platinum rose 0.30 percent to $969.56 and palladium dipped 0.66 percent to $982.5.
