UAE gold climbs Dh11 as US vote weakens dollar

Dubai: Gold prices jumped 2.42 per cent to above $4,025 an ounce on Wednesday. The dollar and US Treasury yields slid after early midterm election results favoured the Democrats. 

UAE prices followed the rally. The 24K rate rose to Dh484 a gram, up Dh11, or 2.3 per cent, from Dh473 on Tuesday. The 22K rate climbed Dh10.25 to Dh448.25 from Dh438. The 18K rate gained Dh8.75 to Dh368.50 from Dh359.75. The 14K rate added Dh6.50 to Dh287.25 from Dh280.75.

Midterms move the dollar

Bloomberg reports showed that that early vote counting had the Democrats leading the race to win back both the Senate and the House. Markets are reading this as a way to hope that there is a lower chance of a deficit-expanding agenda under President Donald Trump over the next two years.

Treasury yields fell across the curve. A gauge of the dollar weakened as much as 0.4 per cent, its biggest drop in two months. Lower yields help gold because it pays no interest. A weaker dollar makes the metal cheaper for most buyers.

“The combination of a weaker USD, falling real yields and demand for protection against a potentially more unpredictable and confrontational Trump administration looks to be providing a compelling backdrop for gold buyers,” says Chris Weston Head of Research at Pepperstone

Iran talks keep gold choppy

Gold has swung this week on mixed signals over US-Iran talks. Tehran and Washington are reviewing fresh proposals from mediators to avoid a return to all-out war, a diplomat briefed on the matter told Bloomberg. Limited US airstrikes reportedly hit targets on Iran’s Qeshm island in the Strait of Hormuz the night before.

Oil prices soared over the past month on rising tensions. They reversed sharply this week on signs the White House will allow more time for diplomacy. Crude moved in a range of about $5 a barrel on Tuesday.

Gold and crude have mostly moved in opposite directions in recent weeks. High energy prices feed expectations of tighter monetary policy, which weighs on a metal that pays no yield.

As markets are in a wait and watch mode, the near-term outlook for gold continues to see-saw. Tony Sage, CEO of Critical Metals says that “stronger inflation signals or higher crude prices could lift yields and weigh on gold. Softer guidance from the Fed or de-escalation in the Middle East that can push oil down may help stabilize the metal and let central-bank demand drive a recovery.”