By: Economy Middle east

Gold prices saw a dip on Monday, influenced predominantly by a firmer U.S. dollar and shifting expectations around the Federal Reserve’s interest rate trajectory. Spot gold recorded a decrease of 0.4 percent, priced at $4,045.58 per ounce, as of 05:36 GMT (currently trading at $4,055.11). Meanwhile, U.S. gold futures for December delivery slipped by 0.9 percent to $4,042.50 per ounce (currently trading at $4,088.70).

In the UAE, gold rates eased further on Monday, with 24-carat gold losing AED2.50 to AED487.25 and 22-carat gold falling AED2.25 to AED453.50. Additionally, 21-carat gold edged down AED2.50 to AED432.50, and 18-carat gold lost AED2.00 to AED370.75.

Rising U.S. dollar pressure

The U.S. dollar index rose to a three-month peak, adding downward pressure on gold prices by making the precious metal more expensive for holders of other currencies, thereby dampening international demand.

Investor sentiment shifted as the Federal Reserve reduced expectations for aggressive rate cuts in the near term. The Fed’s current target federal funds rate stands within the 3.75 percent to 4.00 percent range after reductions earlier in 2025. However, market probabilities for additional immediate rate cuts dropped significantly—from a near certainty in mid-October to around a 22 percent chance by late November—reflecting a cautionary stance by policymakers who signal a potential pause before anticipated further easing in early 2026. This outlook undermines gold’s appeal as a hedge against low interest rates since higher or steady rates increase the opportunity cost of holding non-yielding assets like gold.

Rate expectations and gold support

Despite the recalibration of rate expectations, gold remains supported by ongoing macroeconomic and geopolitical uncertainties. Inflation concerns persist globally, and the metal continues to attract safe-haven buying amid geopolitical tensions that have not fully abated. Central banks worldwide also maintain strong gold buying programs to diversify reserves—a factor bolstering demand fundamentally. Nonetheless, the current strength of the U.S. dollar remains a dominant factor in the short-term gold price dynamics due to the inverse correlation between the two; when the dollar strengthens, gold typically falls as seen in previous episodes throughout 2025.

Record supply vs. rising demand

Supply-demand fundamentals also provide underlying support for gold prices. Global gold supply levels hit a quarterly record in 2025, growing modestly by 3 percent year-over-year. However, this supply growth significantly trails a much stronger 47 percent increase in investment demand, creating a pronounced supply-demand imbalance. This discrepancy supports gold’s price resilience in the medium to long term, despite current volatility and downward pressure. Analysts forecast that if inflation moderates and the Fed resumes rate cuts early next year, gold prices could regain momentum and potentially exceed recent highs.

Mining stocks tied to gold, such as Wheaton Precious Metals Corp., have exhibited cautious trading patterns aligned with gold’s price fluctuations. The interplay of Federal Reserve policy, the strength of the dollar, investment demand, and geopolitical risks will continue to dictate volatility and investment flow trends in gold markets through the remainder of 2025 and into 2026.