UAE: Gold prices drop in Dubai after Fed chief says more rate hikes likely next year

Gold prices fell in the UAE and worldwide on Thursday morning after US Federal Reserve chairman Jerome Powell said more interest rate hikes would come next year.

Spot gold slipped 0.93 per cent to $1,790.83 per ounce as of 9.05am UAE time.

In the UAE, the 24K gold price opened lower at Dh217 per gram on Thursday as compared to last night’s closing rate of Dh219.25. Similarly, 22K, 21K and 18K also opened lower at Dh201, Dh194.5, and Dh166.75 per gram, respectively.

The US Federal Reserve Board on Wednesday announced another increase in the Interest on Reserve Balances (IORB) by 50 basis points. The UAE and other regional banks followed suit.

The Fed will deliver more rate hikes next year, even as the US economy slips towards a possible recession, Powell said on Wednesday, arguing a higher cost would be paid if the central bank does not get a firmer grip on inflation.

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A hawkish Fed is weighing on the bullion market and gold's outlook hinges on how much more tightening central banks, in particular the Fed, plan to do from here, OCBC FX strategist Christopher Wong told Reuters.

"Broadly into 2023, I still favour gold to trade higher but near term into end-year, I won't rule out any profit-taking or pullback in prices."

Gold is traditionally considered an inflation hedge but higher interest rates dim bullion's appeal by increasing the opportunity cost of holding the non-yielding metal.

"We see scope for some retracement of gold's recent gains, but expect safe-haven buying to raise prices. We have subsequently raised our end of 2023 target to $1,900/oz," ANZ said in a note.

waheedabbas@khaleejtimes.com

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