Dubai: Retail gold prices in Dubai dropped by about Dh10 per gram in a little over two weeks, as robust jobs data in the US fueled expectations that a Fed rate increase is likely to happen before the end of the year.

As of 11am on Monday, 24-carat gold was selling at Dh131.50 per gram, down by Dh10 from Dh141.50 in October 21. The precious metal had been losing its value for over a week and fell to Dh131 per gram on Sunday.

The US economy added 271,000 jobs in the non-farm sector last October, particularly in professional and business services, health care, retail trade, construction, food services and drinking places, according to the Bureau of Labour Statistics.

The positive employment report has pushed up the US dollar and boosted speculations that the Federal Reserve has more reasons to increase interest rates in December.

"[The decline] is due to very strong expectations of a Fed interest rate increase this December. Once the Fed starts increasing the interest rate, it becomes expensive for investors to hold gold in their portfolio, Karim Merchant, managing director and CEO of Pure Gold Jewellers, told Gulf News.

Gold’s prices dropped below $1,100 an ounce recently, dragging retail prices in Dubai to as low as Dh131 per gram.

According to ABN Amro’s latest analysis, it is the positive jobs data in the US that further increased the “likelihood of a rate hike in December.”

“The probability has risen from under 60 per cent to 72 per cent. In the near-term, EUR/USD is on its way to test March low just below 1.05 and gold prices will likely test the July low of $1,072 per ounce,” the bank said.

Other analysts believe that gold will continue to perform poorly in the long term. Carsten Menke, commodities research analyst at Julius Baer, noted that the overall sentiment in the gold market has changed quickly after the precious metal approached the $1,200 level in the middle of October.  The trend was due to heightened fears of a Fed rate increase before the end of the year.

"[The recent] much better-than-expected US labour market report added to these fears, pushing gold down below $1,100 per ounce," said Menke.

"However, it was not only the reversal of sentiment but also renewed outflows from physically backed products, which have been weighing on prices as of late."

Gold outflows in November reached close to 30 tonnes, bringing the year-to-date total to 96 tonnes.

Gold Rate: To keep up to date with gold prices, go to our gold rate page.

Currency Rate: To keep up to date with latest exchange rates, go to our currencies page.