Dubai: Gold prices in Dubai dropped by as much as Dh4 per gram in less than a week as Brexit fears started to wane.
As of 4.16pm, 24-karat gold was retailing at Dh153.25 per gram, down from Dh157.25 on Saturday. The price of 22K also dropped to Dh144, while 21K and 18K retailed at Dh137.25 and Dh117.75, respectively.
“Gold prices plunged on the back of weakened safe haven demand due to abating Brexit fears,” the National Bank of Fujairah said in its latest note.
In the Asian market, gold dropped nearly 2 per cent, the biggest one-day loss in a month, following a rally in stocks according to Reuters. Spot gold dropped to $1,266 an ounce at 0705 GMT, hitting a low of $1,261.01, the lowest since June 9.
The precious metal had earlier posted some gains due to the uncertainty over the Brexit referendum. Analysts had forecast share prices to plummet and gold prices to hit new highs if Britain decides to leave the European Union.
“A vote to leave the EU would almost certainly ensure a prolonged period of uncertainty where stocks could suffer and bonds continue to be sought. It might also support the dollar thereby creating some headwind, but given the negative correlation, we see an increased risk that gold could be propelled towards $1,400, the 2014 high,” said Ole Hansen of Saxo bank.
“How will gold react to a Brexit outcome? We think that the first reaction will be higher gold prices. In the days and weeks following the Brexit result, gold prices could rally to $1,350 per ounce. The question is if financial markets will start to anticipate contagion to the Eurozone and a revival of the Eurozone crisis. If there is contagion, gold prices will likely continue to rally and could move above $1,400 per ounce. However, if Eurozone break up fears were truly to mount, leading to a risk off mode that affects liquidity, gold prices are likely to peak again before the climax of the crisis,” said Georgette Boele, co-ordinator FX and precious metals strategy of ABN Amro.
