By: Economy Middle east

Gold prices rose slightly on Monday as the U.S. dollar weakened ahead of the highly anticipated Federal Reserve policy meeting, where traders expected a rate cut. Spot gold increased by 0.42 percent to $4,215.35 per ounce, while U.S. gold futures climbed 0.35 percent to $4,258.05 per ounce. This upward movement was supported by easing inflation data and increasing market expectations for a more accommodating monetary policy.

In the UAE, gold rates saw modest increases, with 24-carat, 22-carat, and 21-carat gold rising by AED1.25, bringing their prices to AED507.00, AED469.50, and AED450.25, respectively. Additionally, 18-carat gold gained AED1.00, reaching AED386.00.

In India, 24-carat gold was priced at INR130,340 per 10 grams, up INR40 or 0.03 percent from the previous close, reflecting a similar optimistic trend globally. Traders positioned themselves ahead of the Fed’s meeting, with market expectations leaning towards monetary easing as U.S. economic indicators softened.

Meanwhile, silver prices fell by 0.29 percent, or 17 cents, trading at $58.23.

Weakened dollar enhances gold demand

The weakened dollar made gold more affordable for international buyers, enhancing demand for non-yielding assets. Recent U.S. data, including a delayed September PCE inflation report, indicated a 0.3 percent monthly increase and a 2.8 percent annual rise, reinforcing the likelihood of an impending Fed cut. Dovish signals from Fed officials and a softening labor market further increased the probability of a rate cut to about 89 percent for the December 9-10 meeting. Additionally, China’s central bank continued to accumulate gold reserves, providing further support amid global uncertainties. Rising physical demand, especially in silver markets impacting gold, highlighted supply constraints with premiums widening in London and Shanghai. Geopolitical tensions and potential leadership changes at the Fed also enhanced gold’s appeal as a safe haven. 

U.S. 10-year yields near multi-month lows enhance gold’s appeal 

The gold-silver ratio decreased to 71.8, indicating silver’s outperformance amid physical shortages, which indirectly benefitted gold. U.S. 10-year yields remained near multi-month lows following employment data, improving gold’s attractiveness. Although earlier Fed actions in September dampened aggressive easing expectations, current trends suggested renewed accommodation through 2026. Institutional buying surged, bolstered by ETF inflows and central bank purchases, offsetting potential profit-taking. Analysts, including those at TD Securities, attributed the momentum to convictions around Fed rate cuts, which might start at 25 basis points but could extend further. Recent U.S. job growth slowdowns heightened recession risks, favoring precious metals.

Traders are closely monitoring upcoming inflation data and Fed commentary for confirmation of rate cuts, with gold positioned near record levels. Some models show a 92 percent probability of near-term easing, although persistent goods inflation poses risks. For investors, the rally emphasizes gold’s role as an inflation hedge and alternative to the dollar, especially with China’s increased reserves signaling long-term bullishness.