Gold volatility offers investors ‘big opportunity’

The volatility in gold rates that the market is currently witnessing presents a great opportunity for potential shoppers in the UAE looking to invest in gold as the prices here are 12-15 per cent cheaper compared to those in some Asian countries, in particular India, investment consultants said.

On Thursday, gold price felt the pull of gravity once again, reverting to 29-month lows of $1,654, as the demand for the dollar continued to rise unabated amid escalating geopolitical tensions surrounding Russia and the West over Ukraine.

In the UAE, the 24K gold price fell to Dh201.25 per gram on Thursday – down from Dh202.5 at the close of the markets on Wednesday, according to data from the Dubai Gold and Jewellery Group. Prices of 22K, 21K and 18K also opened lower at Dh189.0, Dh180.25 and Dh154.5 per gram respectively.

“Dubai’s long standing stature as the City of Gold has resulted in increased spends by tourists on gold. The low gold rates in the UAE is especially attractive to Indian tourists, as the prices here are 12-15 per cent cheaper compared to that in India,” Shamlal Ahamed, managing director – International Operations, Malabar Gold & Diamonds, said.

“However, it is a valid assumption that this window of opportunity which has presented itself to the customers will be short lived and once the market stabilizes, the prices will shoot up again. Considering a global economic slowdown that is on the horizon, the position of gold as a safe haven asset will be further solidified in the times to come,” Ahamed said.

Precious metals analysts said the bullion enjoyed massive volatility and swung in either direction following the expected 75 bps Fed rate hike decision.

In an initial reaction to the Fed announcement, the metal slumped to a fresh two-year low of $1,654 before reversely challenging the $1,690 hurdle during Fed Chair Powell’s press conference. The dollar corrected from 20-year highs of 111.58 after Powell and company projected the terminal rate of 4.6 per cent in 2023, well below the highly anticipated 5.0 per cent figure.

During the pandemic, gold rates in the UAE had climbed as high as Dh235 per gram in August 2020, showing how the depreciation is almost always short-lived.

“There is almost a 20 per cent decrease in prices compared to the highest post-pandemic gold rate, which was Dh234.50/gm in March this year, which further establishes the fact that this is the best time to purchase gold. As the value of Indian rupee continues to slip further, it is a wiser choice for Indian expatriates to invest their assets in Gold due to its ever-increasing value, rather than the usual practice of sending money back to their home countries,” said Ahamed.

Analysts said with most developed-market central banks also hawkish and in the mood to raise rates further, the general fundamental backdrop looks poor for gold, given that it has to a large extent been trading much more like a risk asset than any sort of haven in recent months. Increasing yields in government debt markets have clearly taken much gloss of the market, and are likely to continue to do so, they said.

— issacjohn@khaleejtimes.com