Gold gains in holiday-truncated week; focus on Fed, Trump policies

Gold prices edged higher on Tuesday in lackluster trading in a holiday-trimmed week, as investors braced for U.S. President-elect Donald Trump's trade tariff policies and a less aggressive rate-cut path from the Federal Reserve next year.

Spot gold GOLD added 0.3% to $2,620.83 per ounce, as of 0731 GMT. U.S. gold futures GOLD were 0.2% up at $2,634.10.

The Fed continued cuts in December after a period of aggressive rate hikes but signaled fewer cuts in 2025. Investors are now focused on how gradually the U.S. central bank would cut rates next year.

Higher rates dull the non-yielding bullion's appeal.

While a benign U.S. inflation reading on Friday eased some concerns about the pace of cuts next year, markets are still pricing in just about 35 basis points worth of easing for 2025.

The next thing the market will look for is President-elect Donald Trump's policy on trade tariffs and how the targeted trade partners react to it, said Kelvin Wong, OANDA's senior market analyst for Asia Pacific.

"I believe trade tariffs are one of the negotiation tactics and if the trading partners do not want to buy the stick or the carrot, they may retaliate with other forms of sanction against U.S. products, which could cause volatility in the market, potentially seeing gold's safe-haven demand rise."

U.S. investors are preparing for a swathe of changes in 2025 - from tariffs and deregulation to tax policy - that will ripple through markets as Trump returns to the White House in January.

The bullion scaled multiple record highs this year, rising nearly 27% so far this year, to mark its best annual performance since 2010, driven by robust central bank buying, geopolitical tensions and monetary policy easing by major banks.

Spot silver XAGUSD1! added 0.2% to $29.71 per ounce, palladium XPDUSD1! gained 0.8% to $937.23 and platinum PL1! rose 0.2% to $941.47.