A salesman arranges gold jewellery at a shop in Riyadh. Image Credit: Reuters

Dubai: The prices of gold in the UAE fell further in the wake of Diwali festivities on Wednesday, when the rush to buy jewellery takes center stage.

Spot gold has recently been on a downward path, hitting a low of $1,283.20 an ounce as of 11.50am, after having touched $$1,288.85 earlier in the day.  The bullion had reached a high of $1,304 an ounce last October 13 and $1,296.24 on Tuesday.

At the same time, the price of 24-karat gold in the UAE dropped further to Dh157.75 per gram, down by nearly Dh1 from the day earlier.

Shoppers who opt for 22K gold can expect to spend less as well, with the day’s rate so far pegged at Dh146.25, while 21K and 18K have likewise gotten cheaper at Dh139.75 and Dh119.75.

"I believe this [trend] is now part of the regular fluctuation of the gold price. I see gold in the range of $1,260 to $1,300 an ounce," said Karim Merchant, CEO and managing director at Pure Gold Jewellers.

Merchant said that with the Diwali festivities starting soon, UAE residents have made a dash for the jewellery counters to make a purchase. "The response has been better than expected. We have seen an increase this festive season cmpared to last year in our gold jewellery business."

Some analysts, however, are betting on the precious metal to strengthen. 

Gold prices had gone up on Friday and continued to sell higher on Monday. The bullion’s recent rise was due to the release of the weaker-than-expected inflation rate in the US, according to an analysis by Century Financial Brokers.

The release of US Federal Reserve’s minutes over the weekend may have also played a role. “The [minutes] highlighted ongoing  concerns within the committee that the current subdued inflationary outlook may in fact not be a transitory event,” the firm said in a note.

“The subsequent release of the US consumer price index further emphasized these concerns with both the headline and core rate of price growth missing consensus estimates.”

“With soft inflation continuing to plague the central bank’s exit strategy, gold may continue to benefit as the dollar is likely to remain under pressure. So we are expecting gold to move upside from these levels.”

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