UAE: Gold prices drop slightly; 24K trades at Dh215.25 per gram
Gold is considered a hedge against inflation, but it is highly sensitive to rising US interest rates.
Gold prices fell slightly on Monday morning but were still trading near a one-week high as a drop in US consumer sentiment allayed some concerns of an early tapering by the Federal Reserve.
Spot gold fell 0.17 per cent to $1,775.67 per ounce by 9.15am UAE time.
In the UAE, 24K gold prices fell Dh0.25 per gram to Dh215.25 at the opening of the market on Monday. Among the other variants, 22K was trading at Dh202.25; 21K at Dh193.0; and 18K at Dh165.25 per gram.
"The disappointing consumer sentiment data suggest that the Fed may have more reasons to stay put about tapering asset purchase, and this is definitely good news for gold," said Margaret Yang, a strategist at DailyFX.
However, "towards the end of the year, we may see some lower price levels (in gold)... The overall monetary environment is moving towards tightening," Yang told Reuters.
US consumer sentiment dropped sharply in early August to its lowest level in a decade, as rising cases of the Delta Covid variant threaten to dent the pace of economic recovery.
Gold is considered a hedge against inflation, but it is highly sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion while boosting the dollar.
"Expect tough resistance for gold at $1,800," Singapore’s OCBC said in a note.
"The FOMC (Federal Open Market Committee) minutes is likely to determine gold's next near-term direction, where a hawkish report may send gold tumbling once more," said the note.
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