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Will prices drop lower this week? Unlikely, say experts. Here's why.. Image Credit: Clint Egbert/Gulf News

Dubai: Gold prices won't be retreating as much this week, as red-hot global inflation and a weakening US dollar continue to temper demand for safe-haven bullion.

In the UAE, the cost of 24-karat gold was at Dh223.25 per gram on Monday. Meanwhile, the price of 22-karat gold fell to Dh209.75 per gram, 21-karat to Dh200.00 and 18-karat to Dh171.50 in the UAE. Check the latest gold rates here.

Gold extended losses from prior sessions on Monday as an elevated US dollar weighed on bullion demand, with a US market holiday expected to lead to thin trading during the day.

Globally, spot gold was down 0.2 per cent at $1,836.67 per ounce, while US gold futures - which are indicative of near-term price movements - were flat.

High liquidity, low volatility

"It is a public holiday in the US today [for the Juneteenth holiday], which means liquidity " and therefore volatility " is likely to be lower, thus making directional moves on gold difficult without a fresh catalyst," City Index senior market analyst Matt Simpson said.

Asian shares were unable to sustain a rare rally as US equity futures shed early gains amid worries the US central bank would this week underline its commitment to fighting inflation with whatever rate hikes were needed.

"Gold has effectively been in a choppy range since May 19 between $1,805 and $1,880. And that makes it more of a traders' market than an investors' market. We think traders will opt to buy dips above $1,800 and sell rallies below $1,880," Simpson said.

Gold drops on US dollar weakness

The US dollar index hovered near its highest level in about two decades, making greenback-priced bullion less attractive for overseas buyers.

Gold wrapped up the previous week lower as a stronger dollar and interest rate hikes by major central banks dented the appeal of bullion, which yields no interest.

However, SPDR Gold Trust , the world's largest gold-backed exchange-traded fund, said its holdings rose 1.1% to 1,075.54 tonnes on Friday from 1,063.94 tonnes on Thursday.