Dubai gold prices today: 24K, 22K rates fall as Fed rate-hike bets rise

Dubai: Dubai gold prices slipped on Monday, giving UAE shoppers a little relief after bullion came under pressure from rising expectations of a US interest-rate hike.

The Dubai 24K gold rate fell to Dh533 per gram, from Dh536.75 at the previous close, while 22K gold dropped to Dh493.75 from Dh497.

The move comes as global gold markets digest a more hawkish outlook for US interest rates, after Federal Reserve Chairman Kevin Warsh said policymakers still have “work to do” to bring inflation back to the central bank’s 2 per cent target.

Why gold fell

Gold has faced renewed pressure as traders increased their bets on a US rate hike in September following Warsh’s comments.

Reuters reported that traders were pricing in a 58 per cent chance of a September rate hike, up from 36 per cent before Warsh’s remarks. Expectations for a December increase also rose to 89 per cent, according to the CME FedWatch tool.

That matters for gold because the precious metal does not generate interest or dividends. When interest rates and bond yields rise, holding gold can become relatively less attractive to investors.

The US dollar has also strengthened, reaching a more than one-week high in the latest Reuters update.

“Gold is getting slapped hard as Chair Warsh affirms that inflation isn't meaningfully slowing and the Fed has 'work to do,'” independent analyst Tai Wong said, according to Reuters.

What analysts say

Vijay Valecha, Chief Investment Officer at Century Financial, said gold had dipped below $4,600 an ounce ahead of Warsh’s speech, with part of the decline attributed to profit-taking after bullion reached a three-month high earlier in the week.

He said investors were also weighing the outlook for US monetary policy as policymakers remained divided over the appropriate path for interest rates.

Despite the short-term pullback, Valecha said the broader picture remained supportive for gold.

“Robust investment flows, central-bank accumulation and concerns around U.S. fiscal sustainability continue to underpin the bullish backdrop,” he said. Valecha added that gold had retreated from its recent high near $4,696 but remained above the major $4,369 breakout support level.

For the near term, he identified $4,650-$4,700 as the immediate resistance zone, while $4,550 was the first intraday support level. A break below that could push prices towards $4,500, he said.

India rates

Gold prices also eased in India.

The 24K rate fell to ₹156,760 per 10 grams, from ₹158,240, a decline of ₹1,480 per 10 grams.

The 22K rate dropped to ₹143,700 per 10 grams, from ₹145,050, down ₹1,350.

Reuters also reported that gold discounts in India plunged during the week as demand weakened amid market speculation that the government could consider reversing a recent increase in import duties.

A bigger picture

The latest decline comes after a strong run for gold. Valecha said the precious metal had gained more than 13 per cent in August, its strongest monthly performance since January and one of its biggest monthly gains this century, in the supplied market commentary.

Gold's longer-term support has come from renewed demand for physically backed gold exchange-traded funds, continued central-bank purchases and concerns over US fiscal sustainability.

Bloomberg also described the market as being caught between a more dovish US Treasury stance and a more hawkish Federal Reserve.

Nicky Shiels, head of research and metals strategy at MKS PAMP, described the situation as a “tug of war”, while saying the so-called debasement trade could continue into September and provide support for gold.