Dubai gold prices drop as rate hike bets increase

Dubai: If you are looking to buy gold today in the UAE, you may be willing to loosen those purse strings as prices have dropped by at least Dh10 since the start of the week. Globally gold is reacting to resurgent energy prices and stronger-than-expected US economic data that came in on Wednesday. The glum scenario has tilted the scale in favour of the Federal reserve likely to raise interest rates to combat inflation.

On Thursday, 24-karat gold has become cheaper since yesterdays opening price and is trading at Dh517. 22-karat is being priced at Dh478.75, whereas 18-karat gold is trading at Dh 393.50.

Tug-of-war in diplomatic dialogue

Gold was hovering near $4,290 an ounce, having dropped 1.7% in the previous session. Oil climbed after Iran's President Masoud Pezeshkian used his UN address to take a hard line, saying Tehran will not permit free passage through the Strait of Hormuz for as long as sanctions and the US blockade stay in force. The stance highlights how hard a peace agreement with Washington will be to reach, even as both sides try to restart negotiations this week.

Pezeshkian also said Iran is open to talks but won't bow to threats. He stressed that Iran has no interest in building a nuclear weapons, yet will not surrender its right to pursue nuclear technology for economic purposes. His remarks followed President Donald Trump's claim a day earlier that his team had held "very good" discussions with Iranian envoys on the margins of the UN summit.

Gold down by a fifth since Feb

Gold has largely moved in line with expectations for Fed policy in recent weeks, as investors weigh whether high energy prices will keep inflation elevated enough to force more rate hikes. That would likely hurt bullion, since it pays no interest. The metal has lost roughly 20% since the US-Iran war began in late February.

“Since higher borrowing costs generally weaken the case for holding gold because the metal does not pay interest, its attractiveness as a hedge within a portfolio seems to be standing firm thanks to strong inflows into gold ETFs and demand from central banks, even though US real yields are rising and the strength of the dollar is limiting immediate gains, ” said Vijay Valecha, Chief Investment Officer at Century Financial.

Currently, spot gold is trading at $4,290.24 just 0.18 per cent higher. Silver has dropped to $64.16, down by half a percent. Platinum and palladium edged lower. The Bloomberg Dollar Spot Index, a gauge of the US currency, was stable after rising for four days to a near two-month high.