Gold prices saw a slight uptick on Friday but are on track to post their worst weekly performance in over three years, as a stronger US dollar weighed on the precious metal. The rise in the value of the dollar comes amid expectations that the Federal Reserve will be less aggressive with rate cuts moving forward.
In Dubai, the 24K gold variant increased by Dh1.75 per gram, reaching Dh310.75, up from Dh309 per gram on Thursday. However, other variants of gold, including 22K, 21K, and 18K, saw declines. 22K gold fell to Dh287.75 per gram, 21K dropped to Dh278.50, and 18K decreased to Dh238.75 per gram.
Globally, spot gold was trading slightly lower, down 0.1% at $2,562.61 per ounce as of 9:54 AM UAE time. Gold has fallen more than 4% this week, marking its worst performance since 2020. The metal has also dropped over $220 from its record high reached last month.
The recent decline in gold prices is largely attributed to the strengthening US dollar, which has risen significantly in response to market expectations of fewer interest rate cuts from the Federal Reserve. This has made gold more expensive for holders of other currencies.
Market analysts, such as Fawad Razaqzada from Forex.com, attribute gold’s weakness to the anticipation of a more restrictive US monetary policy in 2025 under President Donald Trump. As interest rates rise, the opportunity cost of holding non-yielding bullion increases, putting downward pressure on its price.
Fed Chairman Jerome Powell’s comments on Thursday also weighed on gold. Powell highlighted that steady economic growth, a strong job market, and persistent inflation justified a cautious approach to rate cuts. The market’s expectation of a rate cut in December has dropped significantly, with the CME Fedwatch tool now indicating a 59% chance of a 25-basis-point reduction, down from 83% just a day earlier.
Analysts suggest that while Powell’s remarks could limit gold’s upside potential, the metal may still attract safe-haven demand if the political landscape under a second Trump term creates further uncertainty.
City Index’s Matt Simpson suggested that with a quiet US economic calendar ahead, gold could recover and possibly retest the $2,600 level. Economic data released earlier this week showed US producer prices increased in October, reinforcing concerns that inflationary pressures are not subsiding as expected.
