UAE gold rate drops Dh6.25 a gram from its all-time high - is that enough for shoppers?
After all-time high of Dh272.25/gm for 22K, gold prices see some cooling
Dubai: UAE gold shoppers have finally got some respite on prices as the local rate drops by Dh6.25 a gram in the last 48 hours. The UAE gold rate is at Dh266 a gram for 22K against Dh272.25 two days ago - which is the highest it has reached.
So, a Dh6.25 dip from that peak might not seem like much for shoppers; but after weeks of gold setting new highs, this dip does come as some sort of relief. At the very least, it breaks the cycle of pushing ever higher. "There was alsways going to be a correction, but many were expecting that it would happen when gold finally got past $2,500 an ounce," said Shamlal Ahmed, Managing Director of International Operations at Malabar Gold & Diamonds.
What we need to see is whether UAE shoppers, including tourists, will react to this drop. Some may prefer to wait for further drops, if that happens.
Today's UAE gold rate drop came about after bullion slipped by more than $50 in the global metals markets over the last 24 hours, to be at $2,366 levels. Gold's highest to date of $2,440 was set in recent days.
"Gold still looks good to go past $2,500, with some minor dips in between," said Ahmed. "For shoppers though, it's about deciding what will be the price they are going to be comfortable with. if it was Dh180-Dh190 a gram a year or two years ago, will they now be OK with Dh230-Dh240 now. If yes, how soon can their mindset change, that's what the retail jewellery market will try and determine."
$380/oz
Is today's drop temporary?
Nearly every analyst tracking gold has been suggesting that the asset is heading for $2,500 an ounce, and that it can come sooner than expected. All through last 10 days, it did look imminent, with gold settling comfortably at over $2,400.
Nigel Green of deVere Group remains ultra bullish on gold's prospects through the rest of the year. "The anticipated interest rate cuts by the US Federal Reserve, continuous gold purchases by the People’s Bank of China (the central bank), and growing demand from regions like Turkey and the Middle East all contribute to a bullish outlook for gold," he said in a note earlier this week.
“The convergence of these multiple factors strongly supports the likelihood of gold hitting new all-time highs within weeks.”
Lower interest rates typically weaken the US dollar, making gold, which is priced in dollars, more attractive to investors as it becomes cheaper for foreign buyers
That's what gold shoppers everywhere have to contend with - that the decline in prices can be quite temporary. So, even if a Dh6 a gram drop from the current all-time high of Dh272.25 could just as easily reverse course.
The next big buying spree could happen in June and up to mid-July, which is when many UAE residents return to their home countries for an extended summer break. By then, these resident shoppers would have made up their minds as to what price of gold they can be comfortable buying at.
If so, will Dh240-Dh250 be the new Dh180-Dh190 for them?