Gold prices fall as dollar index rises

Gold bars

Gold prices declined on Friday amid a stronger US dollar index but are on track for weekly gains, supported by expectations that the Federal Reserve will lower interest rates in its upcoming meeting.

Gold futures for February delivery dropped 0.19% or $5.1 to $2,704.30 an ounce as of 10:41 am KSA time, but remain up about 1.7% for the week.

Meanwhile, spot gold prices were steady at $2,683.14 an ounce. Silver futures for March delivery fell 0.66% to $31.41, while spot platinum prices rose 0.45% to $937.35 an ounce.

The weaker performance of gold coincided with a 0.16% rise in the US dollar index, which measures the dollar’s value against six major currencies, to 107.12 points.

While investors broadly expect the Federal Reserve to cut interest rates by 25 basis points (bps) at next week’s meeting, Producer Price Inflation (PPI) data from the world’s largest economy has raised concerns about the monetary policy outlook for next year.

Annual PPI inflation accelerated to 3% in November, up from 2.6% in October, marking the fastest increase since February 2023, driven by higher food prices.

Gold faced a wave of profit-taking during yesterday’s trading, tempered by the European Central Bank’s decision to lower its main interest rate by 25 bps for the fourth time this year.