Dubai: At around $1,765 an ounce, gold prices are now at its lowest point since the start of the year, after dropping $40 in 24 hours. The Dubai Gold Rate was at Dh203.25 a gram for 22K overnight and is now at Dh201.
The earliest low point for gold was on January 28, when it was in the $1,788 range. “If the gold remains at $1,770 – or even go lower – this would make for a ‘golden week’ for shoppers in the UAE,” said a retailer. “It took way too long for gold to slip under $1,800 in these two years – and shoppers have been waiting.”
Jewellery sources say that many UAE residents had been holding back on purchases in the expectation that gold could drop. Now, they have been proved right, and these buyers intend to take full advantage. (In fact, many resident shoppers – especially those from the Subcontinent, Egypt and even Turkey – were even holding back on their monthly remittances to see whether gold prices would drop and they can take advantage.)
Gold prices dropped more than 2 per cent to the lowest in six months due to the strengthening of the dollar. Recession fears with (further) increase in interest rates by the Fed also added to the decline. Traditionally, gold is considered a hedge against inflation, but higher interest rates to tame rising price pressures make it less appealing.
- Abdul Salam K. P. Vice-Chairman of Malabar Gold & Diamonds.
In fact, many “Shoppers had called to lock in their purchase price at around Dh205/gm last week, when gold slipped to $1,798,” said the retailer. “They had hoped it would drop further and they make the sale at the lower price. Then, when gold started this week at $1,809, they were disappointed.
“But now, they are the ones who will benefit the most because they would get it at Dh203 or under.”
Will gold stick to these levels?
In these two years, each time gold prices dropped below $1,800, it was only fleeting. The window of opportunity for shoppers would be limited to about 48 hours max.
Oil’s latest drop has to do with multiple factors, not least that economies run a higher risk of dropping into a recession. Oil prices too are under pressure with the recession talk. The other factor that will have a hand in gold’s short-term direction is the next US interest rate hike in the coming days, and likely setting up another round of gains for the dollar. Will this soften up gold prices further?
Those residents yet to travel will however be trying to help with the gold buying in any way possible.
What should UAE shoppers do?
If recent past is any indication, don’t keep waiting to see whether gold will fall further or not. If the Dubai Gold Rate is at or around what is considered favourable, go for it. Otherwise, just wait for the next round…
The massive strength of the dollar across asset classes overnight was more than gold could withstand. It wilted in the face of dollar strength and finished overnight 2.40% lower at $1,765.00 an ounce. In Asia, it has eked out a tiny gain to $1767.40 an ounce
