Gold prices hit over an 11-week high on Wednesday, inching closer to their record high amid rising safe-haven demand due to the uncertainty surrounding U.S. President Donald Trump’s trade policies and a softer dollar.
In the UAE, gold rates witnessed a notable surge, with 24-carat gold gaining AED3.5 to AED333.25 and 22-carat gold rising AED3.25 to AED308.5. Meanwhile, 21-carat gold increased by AED3.25 to AED298.75 and 18-carat gold gained AED2.75 to AED256.
Globally, spot gold rose 0.38 percent to $2,753.96 per ounce, as of 6:15 GMT, after hitting its highest since November 1 earlier in the session and inching closer to its record peak of $2,790.15. Meanwhile, U.S. gold futures gained 0.35 percent to $2,768.74.
The U.S. dollar index gained a marginal 0.01 percent to 108.07, retreating significantly from the two-year high it reached last week.
Trump’s trade policy pressures dollar
Gold prices surged as uncertainty surrounding Trump’s policies emerged following his inauguration this week. Trump wants to implement trade policies on major trading partners of the U.S., causing heightened uncertainty in the direction of the U.S. dollar. A weaker dollar makes gold more attractive for holders of other currencies. Gold is also considered a safe investment during economic and geopolitical uncertainty.
After weeks of global speculation regarding Trump imposing tariffs on his first day in office, news that he would take more time on tariffs drove relief among investors and pressured the U.S. dollar. Trump had previously proposed tariffs of up to 10 percent on global imports, 60 percent on Chinese goods, and a 25 percent import tariff increase on Canadian and Mexican products.
Trump also vowed to hit the European Union with tariffs and said his administration was discussing a 10 percent tariff on goods imported from China starting February 1.
Fed to hold rates next week
Trump’s policies are seen as inflationary and gold is a hedge against inflation. However, this appeal may be diminished if the new administration’s actions lead the Federal Reserve to maintain interest rates higher for longer since higher interest rates dampen non-yielding gold’s appeal.
The Fed will meet next week and is expected to hold its benchmark rate steady at the meeting. The central bank will closely watch the new Trump administration’s policies and the bond market, which has raised borrowing costs even as U.S. central bankers have been cutting rates. The rate at which the incoming administration implements Trump’s policy pledges will also significantly influence the future direction of U.S. interest rates.
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 increased after the release of the U.S. producer price index and consumer price index, which indicated that inflationary pressures in the U.S. eased in December.
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.
Read: UAE gold prices gain AED2.5, global rates rise as markets await Trump’s tariff plans
Other precious metals
The precious metals market witnessed positive movement on Wednesday as gold prices rose. Spot silver gained 0.25 percent to $30.94 per ounce while platinum rose 0.42 percent to $947.20 and palladium increased by 0.42 percent to $961.00.
