UAE gold prices surge AED3.5, global rates hit 11-week high on Trump policy concerns

Fueled by uncertainty surrounding U.S. President Trump's trade policies and a weakening dollar, safe-haven demand surged, pushing gold prices to an over 11-week high on Wednesday, nearing their all-time record.

In the UAE, gold prices saw a notable increase, with 24K gold rising by 3.5 dirhams to 333.25 dirhams, and 22K gold increasing by 3.25 dirhams to 308.5 dirhams. Concurrently, 21K gold climbed by 3.25 dirhams to 298.75 dirhams, and 18K gold rose by 2.75 dirhams to 256 dirhams.

Global spot gold prices rose 0.38% to $2,753.96 per ounce by 6:15 GMT, after earlier touching their highest level since November 1st and nearing the record peak of $2,790.15. Meanwhile, U.S. gold futures increased by 0.35% to $2,768.74 per ounce.

The dollar index edged up slightly by 0.01% to 108.07, a significant pullback from the two-year high it touched last week.

Trump's trade policies have exerted pressure on the dollar. The uncertainty surrounding his policies, which surfaced after he took office this week, has caused a surge in gold prices. Trump's desire to impose trade policies on major U.S. trade partners has led to high uncertainty about the dollar's trajectory. A weaker dollar makes gold more attractive to holders of other currencies. Gold is also seen as a safe investment during times of economic and geopolitical uncertainty.

Earlier, global speculation that Trump would impose tariffs on his first day in office was rife, and news that he would delay tariffs eased investor concerns and pressured the dollar. Trump had previously proposed tariffs of up to 10% on global imports, 60% on Chinese goods, and a 25% increase in import duties on products from Canada and Mexico.

Trump has also vowed to impose tariffs on the European Union and has indicated that his administration is discussing a 10% tariff on Chinese imports, effective from February 1st.

Trump's policies are considered inflationary, and gold is a hedge against inflation. However, this appeal may diminish if the new administration's actions lead the Federal Reserve to maintain higher interest rates for an extended period, as higher rates reduce the attractiveness of non-yielding gold.

The Federal Reserve is scheduled to meet next week and is expected to hold benchmark interest rates steady at the meeting. The Fed will be closely monitoring the policies of the new Trump administration and the bond market, which has increased borrowing costs despite the U.S. central bank cutting rates. The speed at which the new administration implements Trump's policy promises will also significantly impact the future direction of U.S. interest rates.

Last week, gold prices rose for the third consecutive week as markets bet that the Federal Reserve might cut interest rates further in 2025. Market expectations were boosted after the release of the U.S. producer price index and consumer price index, which indicated that inflationary pressures in the U.S. eased in December.

Federal Reserve Governor Christopher Waller stated last Thursday that inflation could continue to ease, which would allow the U.S. central bank to cut interest rates sooner and faster than expected. Waller indicated that three or four rate cuts are still possible this year if U.S. economic data weakens further.

The precious metals market also saw positive movement on Wednesday, with gold prices rising. Spot silver increased by 0.25% to $30.94 per ounce, platinum rose by 0.42% to $947.20, and palladium climbed by 0.42% to $961.00.