Gold prices in Dubai fell by two dirhams per gram on Wednesday morning in line with the drop in global rates as the US dollar emerged as a preferred safe-haven bet.
The Dubai Gold and Jewellery Group data showed 24K trading at Dh219 per gram at the opening of the market on Wednesday, two dirhams lower than the previous day’s close. Among the other variants of the precious metal, 22K was trading at Dh205.5 per gram, 21K at Dh196.25 and 18K at Dh168.25.
Globally, spot gold was down 0.11 per cent to $1,808.46 per ounce at 9.30am UAE time on Wednesday.
Tomasz Wisniewski, director of research and education at Axiory Intelligence, said two dominant forces are pulling the precious metal in opposite directions.
“Gold is dragged down by a stronger US dollar, which broke major supports on many currency pairs and it seems that this will continue in the next few weeks, which is negative for the bullion. On the other hand, gold is being lifted by fears about the next wave of infections and mutations of the Covid-19 virus,” he added.
The US dollar rose 0.1 per cent to hover near a three and a half month peak against its rivals, potentially trimming appetite for gold by making the metal more expensive for holders of other currencies.
“In general, our forecast for the gold prices is positive. In the next few weeks, the price is poised to go up, driven by fears about another wave of Covid infections, high inflation and possibly a bigger correction on global stock indices,” said Wisniewski.
Naeem Aslam, chief analyst at AvaTrade, said the rise in the US dollar is because of a sooner than anticipated hike in interest rates as communicated by the Federal Reserve at its last meeting, while treasury yields have fallen as investors seek refuge from the bearish stock market.
“A drop in yields lowers the opportunity cost of holding the non-interest-bearing precious metal, whereas a rise in the value of the dollar usually results in a drop in gold prices. Traders should keep a close eye on the Federal Open Market Committee (FOMC) meeting next week to see if the hawks take control in the coming months,” said Aslam.
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