Shoppers check out a bridal jewellery set weighing 630.92 grams
Shoppers check out a bridal jewellery set weighing 630.92 grams at a Kanz Jewellery in Deira Gold Souq. Image Credit: Atiq Ur Rehman /Gulf News

Dubai: Gold prices dropped on Tuesday after persistantly recording weekly losses, with futures - which are indicative of near-term prices - were seen dropping unusually more, giving hope to potential gold buyers in the UAE.

In the UAE, the cost of 24-karat gold was at Dh232.75 per gram on Tuesday, down from Dh234.50 on Monday. Check the latest gold rates here. Meanwhile, the price of 22-karat gold fell to Dh218.75 per gram, 21-karat to Dh208.75 and 18-karat to Dh178.75 in the UAE.

Commodity market participants were looking forward to Russia-Ukraine peace talks starting later in the day. Globally, spot gold was unchanged at $1,922.67 per ounce. US gold futures were down 0.9 per cent at $1,922.60.

Gold prices will steer away from  $1,965 and $1,975 per ounce levels, with costs to largely stay supported in the range of $1,917 and $1,910, US-based OANDA senior analyst Jeffrey Halley wrote in a note.

Gold jewellery
Traders are only seeing “desperate buying” from those shoppers who are concerned that if they delay, prices might shoot up again. Image Credit: Atiq Ur Rehman /Gulf News

Will gold stay expensive?

The dollar index held firm near a three-week high hit in the previous session, making gold more expensive for other currency holders. US benchmark 10-year government bond yields hovered close to three-year highs, increasing the opportunity cost of holding non-yielding bullion.

(The bond yields are inversely related to the bond prices. The lower the price, the higher the yield, and vice versa. Because both gold and government bonds are considered to be safe-haven assets, there is a positive correlation between gold and bond prices, and negative correlation between gold prices and bond yields.)

Ukraine said its top objective at the first face-to-face talks with Russia in more than two weeks, due to take place in Turkey on Tuesday, was to secure a ceasefire, although both it and the US were sceptical of a major breakthrough.

"The lingering geopolitical risk is offering a little bit of support (to prices), but the big elephant in the room would be the US central bank moving into a more restrictive territory given the inflation angst that's hitting the markets right now," said Stephen Innes, managing partner at SPI Asset Management.

A saleswoman selects gold necklaces in a jewellery showroom in India
The Russia-Ukraine uncertainty pushed some investors to buy gold and pushed up gold prices.

Buy now or wait?

Due to the Russia-Ukraine conflict, the global supply of oil and gas is expected to go down with sanctions against Russia and oil prices consequently went up. The uncertainty also pushed some investors to buy gold and pushed up gold prices.

For any investor, holding gold makes a lot of sense when there is an expectation of sticky inflation and dollar strenght. Though this may play out globally for some time and gold may remain in demand, investors have to be measured in their action.

Though it’s common for new investors to compare asset classes and go for the one that has given the highest returns, experts say this is unwise. It is not stocks or gold, rather it is stocks and gold, along with other asset classes, that will help you invest better and make consistent returns.

Dubai-based commodity analysts opined how though gold prices may go up further and the best time to buy gold being six months ago, now, allocations to gold should be in line with asset allocation needs. Aggressively chasing gold for returns is best avoided, market experts add.

But just because gold prices have risen in the recent past, analysts add that it doesn't mean that one should not take that to mean prices will keep moving up. Commodity experts expect drop in gold prices after a rise over the last few weeks, which should act as a good entry point for investors and buyers.

- with inputs from Agencies