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Gold gained on Thursday in light holiday trading, boosted by slight weakness in U.S. dollar and geopolitical tensions, as investors eyed Federal Reserve's 2025 rate strategy and Trump's tariff policies, which could shape the metal's trajectory next year.

Spot gold rose 0.5% to $2,626.10 per ounce, as of 0246 GMT.

Bullion has risen 27% this year and is on track for its best performance since 2010, driven by major Fed cuts and heightened geopolitical uncertainties.

Gold is considered a safe investment option during geopolitical turmoil and thrives in low interest rate environment.

U.S. gold futures added 0.3% to $2,643.70.

In a holiday-curtailed week, trading volumes will likely thin out as the year-end approaches.

The dollar index fell 0.1%, making greenback-priced bullion more affordable for holders of other currencies. [USD/]

"Some inaction on the U.S. dollar and U.S. Treasury yield in today's session allows gold prices to resume its recovery following its post-Fed dip," said IG market strategist Yeap Jun Rong.

The usual positive trends in gold during the last week of December is contributing to the current rise in gold prices, Yeap Jun Rong added.

On the geopolitical level, Hamas and Israel exchanged blame on Wednesday for failing to finalize a ceasefire agreement, despite reporting progress in recent days.

"We are hearing about uncertainties related to the Middle East. If the situation escalates, it might create an upside bias (for gold)," said Brian Lan, managing director at Singapore-based dealer GoldSilver Central.

"I don't expect gold to do much at this point and it will likely close around current levels by year-end."

Traders are awaiting the U.S. jobless claims data due later in the day and are bracing for major policy changes, including tariffs, deregulation, and tax shifts, as Trump returns to the White House in January.

Markets in Australia, New Zealand, Hong Kong and Euro Zone are closed on Thursday for the Boxing Day public holiday.

Spot silver was flat at $29.6 per ounce, platinum fell 0.8% to $936.41 and palladium shed 1.2% to $942.52.