Gold prices rose on Monday as investors looked forward to President-elect Donald Trump’s inauguration speech for further insight into the incoming administration’s policies which could also offer additional hints about the Federal Reserve’s interest rate trajectory.
In the UAE, gold rates remained largely steady, with 24-carat gold dipping AED0.25 to AED327.50 and 22-carat gold rising AED0.25 to AED303.25. Meanwhile, 21-carat gold and 18-carat gold gained AED0.25 to AED293.75 and AED251.75, respectively.
Globally, spot gold rose 0.15 percent to $2,707.32 per ounce, as of 6:08 GMT, after falling 0.5 percent earlier in the day. Meanwhile, U.S. gold futures gained 0.03 percent to $2,749.55.
The U.S. dollar index lost 0.22 percent to 109.11, making bullion more attractive for other currency holders.
Trump’s inauguration in focus
Gold prices rose as investors awaited Trump’s inauguration today and any signals regarding future policies he might enact. Trump’s broad trade tariff policies are expected to further fuel inflation and trigger trade wars with key partners, potentially increasing gold’s safe-haven appeal.
The precious metal continues to maintain its status as a traditional safe-haven asset which should limit an immediate downside following the inauguration. If Trump signals a softer approach to trade and tariff policies, the U.S. dollar and Treasury yields will likely recede, benefitting gold prices. Gold is a hedge against inflation, but higher interest rates impact its appeal.
Traders expect Trump’s protectionist policies to boost inflation and force the Fed to stick to its hawkish stance. This, along with easing tensions in the Middle East and hopes that Trump eases the conflict between Russia and Ukraine, might contribute to capping the gains in gold prices.
Fed to cut rates further this year
Gold prices registered gains for the third consecutive week last week amid bets that the Federal Reserve may cut interest rates further in 2025. Market expectations were lifted by the U.S. producer price index and consumer price index, which indicated that inflationary pressures in the U.S. eased in December.
In addition, Fed Governor Christopher Waller said last Thursday that inflation is likely to continue to ease which will allow the U.S. central bank to cut interest rates sooner and faster than expected. Waller said three or four rate cuts are still possible this year if U.S. economic data weakens further.
However, the future path of U.S. interest rates will largely depend on how aggressively the incoming administration implements Trump’s policy pledges. 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, they could also prompt the Fed to take a more cautious stance on rate cuts, limiting an upside in gold prices.
The Federal Reserve will likely hold interest rates steady on January 29 and resume cutting rates in March.
Read| Global markets to trade with considerable volatility as Trump takes office: Saxo Bank
Other precious metals
The precious metals market witnessed a mixed movement on Monday as gold prices rose. Spot silver gained 0.14 percent to $30.38 per ounce while platinum lost 0.16 percent to $940.98 and palladium gained 0.14 percent to $948.84.
