Dubai gold dips below Dh500, sweetening festive buying

Dubai: Gold prices continue to decline as expensive crude prices have once again stoked inflation fears which could leave the Federal Reserve questioning whether it will pause a hike in its next rate move.

Gold hovered around $4,140 an ounce after dropping 0.6 per cent the day before. Oil held near its highest level in five months as Iran warned it has “no choice” but to assert authority over the Strait of Hormuz. US lawmakers also resisted Trump’s deal to export diesel to Russia.

In the UAE, prices have eased by Dh2-5 overnight. 24-karat gold trades below Dh500 at Dh497. 22-karat is priced at Dh460.25, 18-karat is at Dh378.25 while 14-karat is priced at Dh295 this Tuesday. As India celebrates Dussehra today, UAE expat shoppers might be in for a sweet treat as prices remain lower than what it has been in the past two weeks.

Traders are trying to read the Fed’s next move as it works to contain inflation. Chair Kevin Warsh used the eve of the pre-meeting communications blackout, ahead of next week’s gathering, to signal backing for holding rates steady. Odds of a quarter-point hike fell below 20 per cent, down from as high as two in three late last month.

Gold has mostly stayed above $4,100 this October, steadying after a drop of more than 6% in September, even with a firmer US dollar and elevated bond yields. It remains about 20% lower than when the US-Iran conflict broke out in late February, and traders still price in a 90% chance of another rate increase by year-end. Higher borrowing costs weigh on gold because it pays no interest.

Spot gold eased 0.1 per cent to $4,140.91 an ounce as of 09:30 a.m. in Dubai, while silver gained 0.25 per cent to $57.28 an ounce. Platinum and palladium also dipped slightly. The Bloomberg Dollar Spot Index, which tracks the greenback, barely moved after a 0.1 per cent gain in the previous session.