Dubai: Gold prices are expected to briefly rise after the world's largest economy, the US, signaled slowing rate hikes for the first time, commodity analysts evaluate. However, prices are expected to drop again thereafter, which is why buyers may look to wait before making the most of the looming lower rates.
In the UAE, the cost of 24-karat gold rose to Dh212.75 per gram on Thursday. Meanwhile, the price of 22-karat gold slipped to Dh199.75 per gram, 21-karat to Dh190.75 and 18-karat to Dh163.5 in the UAE. Check the latest gold rates here.
Analysts also evaluated how gold prices worldwide have been disappointing for investors last week - which was edging towards $1,750 in the past few days. Globally, spot gold price was at $1,755 per ounce, and gold futures - indicative of near-term prices - advanced 0.6 per cent to $1,755.90.
Low rates make gold costly
Lower rates tend to lift the appeal for bullion worldwide in comparison with other interest-bearing assets. High interest rates have kept a leash on gold's traditional status as a hedge against high inflation and other uncertainties this year as they translate into higher opportunity cost to hold the non-yielding asset.
The minutes of the Fed's Nov. 1-2 meeting showed that a "substantial majority" of US policymakers agreed it would "likely soon be appropriate" to slow the pace of interest rate hikes. Also, economies worldwide have historically tracked rate hike moves of the top economy, the US. So markets are now pricing in an 85 per cent chance of a lower 50-basis point (bps) increase in the December meeting, after four straight 75 bps hikes.
"The minutes and the perceived response from markets that a slowing down of rate hikes alongside the extreme seasonal pattern of buying in late November-December into end of the first quarter has driven the metals markets higher into Asia," said David Mitchell, managing director at Singapore's Indigo Precious Metals.
Providing a further fillip to gold and precious metals overall, the dollar was broadly lower following the minutes. A weaker dollar makes bullion cheaper for overseas buyers. However, spot gold may end its bounce around $1,757 per ounce and resume its drop thereafter, according to Reuters technical analyst Wang Tao.
- with inputs from Reuters