Gold prices in the UAE experienced a decline on Monday following a stronger-than-expected U.S. jobs report that reinforced expectations of a cautious approach from the Federal Reserve regarding interest rate cuts this year. Meanwhile, global gold prices also saw a slight dip, influenced by a stronger U.S. dollar.
In the UAE, 24-carat gold dropped by AED0.75, settling at AED325.25 per gram, while 22-carat gold also saw a decrease of AED0.75, priced at AED301. Similarly, 21-carat gold fell by AED0.5 to AED291.50, and 18-carat gold dropped AED0.75 to AED249.75.
Global Gold Prices Decline
Globally, spot gold dropped 0.05 percent, trading at $2,687.96 as of 6:11 GMT, while U.S. gold futures saw a marginal decline of 0.03 percent, reaching $2,714.20.
The U.S. dollar index, which measures the dollar’s performance against a basket of currencies, rose by 0.17 percent to 109.83, reaching a two-year high. This surge made gold less attractive to holders of other currencies, contributing to the dip in prices.
Stronger U.S. Jobs Report Impacts Gold Prices
The drop in gold prices comes on the heels of a robust U.S. nonfarm payrolls report released last Friday. The U.S. Bureau of Labor Statistics revealed that nonfarm payrolls rose by 256,000 in December, significantly surpassing the 212,000 jobs added in November and exceeding market expectations of 160,000.
The report also showed that the U.S. unemployment rate fell unexpectedly to 4.1 percent from 4.2 percent, while annual wage inflation declined to 3.9 percent. This data has fueled speculation that the Federal Reserve will maintain its cautious stance on interest rate cuts for the foreseeable future, keeping bond yields and the U.S. dollar strong, which in turn put pressure on gold prices.
The increase in bond yields and the strengthening dollar came in the wake of the Federal Reserve’s hawkish shift in December. With inflationary concerns remaining high, the market now anticipates that the Fed will hold rates steady at its next meeting later this month, with only one rate cut expected in June 2025.
Focus Shifts to Inflation Data and Fed Comments
As traders await U.S. inflation data, which will be released later this week, attention is also on upcoming comments from Federal Reserve officials. Any signs of economic weakness could fuel expectations for rate cuts, potentially providing some support for gold prices.
Gold is traditionally seen as a hedge against inflation, but higher interest rates make non-yielding assets like gold less appealing. Consequently, market participants are keeping a close eye on the U.S. economic data for clues on the Fed’s next moves.
Geopolitical Tensions and Trump’s Inauguration Impact Gold Outlook
Investors are also looking ahead to Donald Trump’s upcoming inauguration on January 20. The U.S. central bank’s December meeting minutes indicated that officials were concerned about inflationary pressures resulting from Trump’s potential protectionist policies and expansionary fiscal stance.
Trump’s proposed tariffs and protectionist measures are expected to increase inflation and disrupt global trade, which could drive investors toward safe-haven assets like gold. However, these same policies could also prompt the Fed to take a more cautious approach to interest rate cuts, potentially limiting gold’s upside.
Additionally, Trump has hinted at escalating geopolitical tensions in the Middle East once in office, which could further drive demand for gold as a safe-haven asset. The ongoing Russia-Ukraine conflict and rising tensions in the Middle East have already been significant factors contributing to gold’s surge in 2024, and this trend is expected to continue into 2025.
Other Precious Metals Decline
The broader precious metals market also experienced a downturn on Monday. Spot silver fell by 1.01 percent to $30.09 per ounce, while platinum dropped 0.52 percent to $959.88. Palladium also saw a decrease, losing 0.28 percent to $945.25 per ounce.
The movement in these metals closely follows the broader trend in gold, with investors adjusting their positions in response to the stronger dollar and changing expectations around U.S. monetary policy.
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