Dubai: The yellow metal is again gaining some ground, with retail prices in Dubai posting a nearly 5 per cent rise per gram since the beginning of the year.
Gold’s rise from the December low has been due to a weak US dollar and strong safe-haven demand that resulted from the new initiatives announced during Donald Trump’s first few days in office.
The yellow metal also gained some support from strong Chinese demand in the run-up to the Lunar New Year celebrations, while uncertainty remains on that outcome of the upcoming US Federal Reserve meeting on Wednesday.
As of 10am, 24K gold in Dubai retailed at Dh145.75 per gram, up by 4.48% from January 1, 2017. Spot prices also rose 0.4 per cent to regain the $1,200 level, as the greenback moved lower against other currencies.
"Gold is a safe haven, it strengthens when US dollar weakens. As the US dollar has weakened due to uncertainties unleashed by President Trump's foreign trade and immigration policies, gold prices have strengthened," Karim Merchant, group CEO and managing director of Pure Gold Jewellers, told Gulf News.
"There is also a little bit of wait and watch on Fed decision on further interest rate hike."
Nevine Pollini, equity analyst at UBP, said a “small US dollar correction” has provided some support for gold. “Since Monday, the release of the preliminary US fourth quarter GDP data, which was slightly weaker than expected, followed by President Trump’s controversial decree has prompted a small US dollar correction which has benefited gold prices,” Pollini said.
“The immigration ban was particularly worrying as investors believe that these announcements could now be followed by the implementation of Trump’s hard-line protectionist/anti-trade agenda which could spark a trade war.”
Pollini, however, could not say whether or not the trend will continue, as the market is still awaiting the outcome of the FOMC meeting.
“Even though we believe that the Fed will not raise rates at this particular meeting, we still think that it may do so more aggressively than expected by the market over the course of the year, which will definitely be detrimental to gold prices.”
Analysts had warned earlier that Trump’s new initiatives “may sway the pendulum back in favour of gold.” “Adding to this, we have the potential of Trump sending out more signals about preferring a weaker dollar,” noted Ole Hansen, head of commodity strategy at Saxo Bank.
“Already we are seeing [Trump’s] ‘American first’ mantra being played out through policy initiatives. The jury is still out on whether trade barriers and import taxes will lead to a stronger dollar. Protectionism could trigger a contraction in global trade and with that, we could see less, not more, demand for US dollars.”
The precious metal had earlier traded lower for the first time in more than a month as traders booked profits ahead of the Chinese New Year. The bullion, however, started to regain strength on Monday, just shortly after Trump’s latest move to stem immigration flows into the United States.
Just days into his administration, Trump triggered a backlash when he issued an executive order temporarily banning the entry of people from predominantly Muslim countries.
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