Gold prices rose on Friday and were set for a seventh successive weekly gain as U.S. President Donald Trump’s plans to impose reciprocal tariffs on countries taxing U.S. imports raised concerns of a global trade war.
In the UAE, gold rates recorded a notable rise, with 24-carat gold gaining AED2.5 to AED353 and 22-carat gold rising AED2.25 to AED328.25. Meanwhile, 21-carat gold increased by AED2 to AED314.75 and 18-carat gold gained AED1.75 to AED269.75.
Globally, spot gold climbed 0.42 percent to $2,928.88 per ounce, as of 5:43 GMT. Gold hit a new record high of $2,942.70 on Tuesday. Meanwhile, U.S. gold futures gained 0.38 percent to $2,956.72.
Trump proposes additional tariffs
On Thursday, Trump asked his economics team to set up plans for reciprocal tariffs on every country taxing U.S. imports. This plan targets several countries including China, Japan, South Korea and the European Union.
However, commerce and economics officials need to study reciprocal tariffs against countries that place tariffs on U.S. goods, giving countries time until April 1 to avoid a trade war.
This announcement propelled gold prices this week amid rising trade war concerns which could potentially impact global economies.
U.S. inflation rises
Data on Thursday revealed that the U.S. producer price index (PPI) saw a strong increase in January. The PPI rose 3.5 percent annually in January following a 3.3 percent increase in December, according to the U.S. Bureau of Labor Statistics on Thursday.
This reading came in above market expectations of 3.2 percent. The annual core PPI also rose 3.6 percent last month, beating estimates of 3.3 percent.
This week’s inflation data offered more evidence that inflation was accelerating again and strengthened views that the Federal Reserve would not cut interest rates before the second half of the year. Gold is traditionally viewed as a safe haven against inflation and economic uncertainty, but the non-yielding asset’s appeal diminishes with rising interest rates.
The U.S. Bureau of Labor Statistics also reported on Wednesday that the headline U.S. consumer price index rose 0.5 percent in January, the most since August 2023, and the yearly rate climbed to 3 percent from 2.9 percent in December.
In addition, the U.S. initial jobless claims data for the week ending February 8 fell to 213,000, compared to the previous week which recorded 220,ooo.
Fed rate cut prospects diminish
Earlier this week, Federal Reserve Chair Jerome Powell told U.S. lawmakers that the battle with rising prices wasn’t done yet and any further interest rate cuts would have to wait until it was clear inflation would return to the 2 percent target.
The Atlanta Fed President noted that the labor market is performing incredibly well and the GDP is more resilient than expected but the latest inflation numbers show careful monitoring is still needed. Market participants were quick to react and now see just one Fed rate cut by the end of this year.
A U.S.-China trade breakthrough, de-escalation in the Russia-Ukraine conflict, and strong U.S. data that takes Fed rate cuts off the table for this year are all possible reasons for gold prices to drop. However, all seem to be unlikely in the near term.
Read: Oil prices rise to $75.16, break third weekly decline as trade war fears ease
Other precious metals
As gold prices rose, the precious metals market saw positive movement on Friday. Spot silver climbed 0.40 percent to $32.49 per ounce, platinum gained 0.36 percent to $998.72 and palladium rose 0.21 percent to $996.38.
