Dubai 22-karat gold drops to Dh450 as prices continue to soften

Dubai: With all eyes on the US Federal reserve and its decision later today, gold prices have been testing the $4,000-an-ounce threshold. Overnight, gold retreated by over 0.5 per cent shaving off the 1.1 per cent it added in the previous session. 

But it is the blazing oil prices that have weighed on sentiment with Brent crude climbing to $115 per barrel. The Wall Street Journal has also reported that Washington has warned several Gulf states to prepare for a renewed military campaign against Iran. 

In the UAE, gold prices continue to soften, brightening prospects for shoppers. 24-karat gold is being priced at Dh486.50 versus the Dh489 it demanded a day before. 22-karat has come down to Dh450.50, 18-karat is commanding Dh370.25 per gram, while 14-karat is down to Dh288.75 on Wednesday.

Hectic buying may raise prices

But even though bullion is testing $4000 levels, Chinese and Indian households have been lending support. Physical buyers and bargain hunters have kept the decline from deepening. Their appetite for bullion has strengthened over the past two months as prices eased and domestic equities lost their appeal. 

But with the festive season approaching Indian buyers may blunt the lift. Households are delaying festive purchases in the expectation of even lower prices, the country’s biggest precious metals refiner MMTC-PAMP India told Bloomberg. 

India, the second-biggest buyer of gold, has seen sluggish demand this year after May’s duty hike to 15 per cent, up from less than half that level. Modi has repeatedly urged citizens to buy less to narrow the trade deficit, and the country imports nearly all its gold. The higher levy has also driven more transactions into informal cash markets. 

Can gold prices decrease further?

According to Konstantinos Chrysikos, Head of Customer Relationship Management at Kudo

“Any hawkish messaging, especially if oil keeps climbing, would likely extend bullion’s losses. Any signal of a less restrictive stance could set up a relief rebound. Even then, markets are still pricing further tightening in December and beyond, which is likely to limit any recovery.”

Gold is still working its way back from last week’s slump in artificial intelligence stocks. The metal fell to its weakest level since mid-July as investors sold it to cushion losses in other holdings. A tech rally fuelled by fresh appetite for the AI trade has since softened that blow. 

Spot gold fell 0.77 per cent to $4,030.28 an ounce at 10:15 am in Dubai. Silver slid 1.03 percent to $53.88 an ounce. Platinum and palladium also declined. The Bloomberg Dollar Spot Index, a gauge of the US currency, rose 0.1 per cent.