Gold prices witnessed a modest increase on Thursday, continuing their robust performance from 2024, as a declining U.S. dollar provided support. However, traders remained cautious due to the U.S. Federal Reserve‘s prediction of fewer interest rate cuts this year.
In the UAE, gold rates saw an uptick, with 24-carat gold priced at AED319.00, while 22-carat gold rose by AED3 to AED295.25. Additionally, 21-carat gold increased to AED285.75, and 18-carat gold climbed to AED245.00.
Spot gold rose by 0.3 percent to $2,632.82 per ounce, and February gold futures edged up 0.1 percent to $2,644.47 an ounce by 23:06 ET (04:06 GMT).
Gold concludes 2024 with significant gains; 2025 outlook clouded by Fed rate projections
The yellow metal surged by 27 percent in 2024, achieving its best annual performance since 2010, driven by the Fed’s significant rate cuts from the previous year and ongoing geopolitical tensions worldwide. Low interest rates reduce the opportunity cost of holding gold compared to interest-earning assets like bonds or savings accounts, prompting investors to allocate more funds to gold as a means of safeguarding against uncertainty and preserving value.
Despite gold’s overall rise throughout the year, the Fed’s December meeting served as a setback, indicating only two further rate cuts in 2025. Following this announcement, gold prices dropped sharply and have shown limited movement since, leading to a cautious outlook for the coming year.
Dollar weakens yet remains close to two-year high; other precious metals rise
The U.S. Dollar Index fell by 0.2 percent during Asian trading hours on Thursday but remained near the two-year high it reached last month. The US Dollar Index Futures also saw an increase. With expectations of fewer rate cuts in 2025, the dollar has strengthened further, placing additional pressure on gold prices. A stronger dollar typically burdens gold prices, as it makes the metal pricier for buyers using other currencies.
Other precious metals reported gains on Tuesday. Platinum futures rose by 0.7 percent to $916.65 per ounce, and silver futures climbed by 1.6 percent to $29.715 per ounce.
Copper prices rise on weaker dollar and Chinese PMI data
In the realm of industrial metals, copper prices surged on Thursday, spurred by a weaker dollar, while an increase in monthly Chinese factory activity provided further support. According to Caixin PMI data released on Thursday, Chinese manufacturing activity grew in December, albeit at a slower-than-expected pace. This data indicates that the effects of recent stimulus measures are diminishing. Markets are now looking for more clarity regarding Beijing’s stimulus plans in the upcoming year, with the government hinting at a looser monetary policy in 2025.
Benchmark copper futures on the London Metal Exchange rose by 0.9 percent to $8,863.50 a ton, while February copper futures gained 0.7 percent to $4.0492 a pound.
Light year-end trading
Gold prices maintained relative stability on Tuesday amid light trading as the year draws to a close, although they are poised for impressive annual gains propelled by the U.S. Federal Reserve’s interest rate cuts this year. In the UAE, gold prices held steady, with 24-carat gold priced at AED315.15 and 22-carat gold at AED292.25. Additionally, 21-carat gold stood at AED283, while 18-carat gold was priced at AED242.50.
Spot gold remained steady at $2,607.65 per ounce, while February gold futures dipped by 0.2 percent to $2,620.22 an ounce by 00:23 ET (05:23 GMT). Trading in gold often experiences lower volumes and subdued prices as the year concludes, with many institutional traders and market participants closing their positions ahead of the holiday season.
Gold on track for notable annual gains
The yellow metal has surged over 26 percent in 2024, driven by the Fed’s substantial rate cuts earlier this year and ongoing geopolitical tensions globally. Low interest rates diminish the opportunity cost of holding gold in comparison to interest-yielding assets such as bonds or savings accounts. As a result, investors typically allocate more resources to gold as a hedge against uncertainty and a means of preserving value.
While gold prices have generally trended upward throughout the year, the Fed’s December meeting caused a temporary dip in prices, indicating fewer rate cuts ahead. Policymakers now forecast only two additional cuts in 2025, down from earlier expectations of four, as persistent inflation remains a significant concern. Following the Fed’s meeting, gold prices sharply declined and have exhibited limited movement since, reflecting a cautious outlook for the upcoming year. With expectations of fewer rate cuts, the dollar has strengthened further, applying additional pressure on gold prices. A stronger dollar tends to depress gold prices, making the metal more expensive for buyers using other currencies.
Other precious metals also experienced slight declines on Tuesday, with platinum futures falling by 0.4 percent to $913.65 per ounce, and silver futures dipping by 0.3 percent to $29.315 per ounce.
