Stock UAE Gold
After having dropped last week during the Indian occasion of Diwali, UAE residents hoping to buy gold would be relieved to know prices are expected to stay that way for now. Image Credit: Clint Egbert/Gulf News

Dubai: After having dropped last week during the Indian occasion of Diwali, UAE residents hoping to buy gold would be relieved to know prices are expected to stay that way for now while dropping even further next month.

In the UAE, the cost of 24-karat gold dipped to Dh199.25 per gram on Monday. Meanwhile, the price of 22-karat gold slipped to Dh187 per gram, 21-karat to Dh178.5 and 18-karat to Dh153 in the UAE. Check the latest gold rates here.

Analyts evaluated how gold prices have been a little disappointing for investors last week given the dollar moving lower - which was widely expected to head towards $1,700 in the past few days. Globally, spot gold price was at $1,641.67 per ounce, and down 1 per cent for the month.

With global investors cementing expectations around another hefty rate hike from the US this week, gold remains highly sensitive to rising rates in the world's largest economy, as these increase the opportunity cost of holding non-yielding bullion, while boosting the dollar.

Stock UAE Gold
In medium term there's greater chance for gold to go lower than higher.

Gold to drop more soon?

"Another pronounced rate hike of 75 basis points is generally anticipated after US inflation remained stubbornly high again in September," analysts at Commerzbank AG, a major German bank operating as a universal bank, wrote in a note.

"That said, if the central bankers were to hint that they will raise their key rate at a less aggressive pace in future in response to the cooling economy, for instance the gold price could be lent some tailwind."

Gold's move will depend on data and cues from the US central bank's upcoming meeting if it is close to pausing or will keep tightening interest rates. While the US widely expected to raise its benchmark overnight interest rate by 75 basis points at its November meeting, sentiment is building among officials to take a breather.

Gold prices have fallen more than 10 per cent so far in the year amid sharp US interest rate hikes, which increases the opportunity cost of holding the asset, which yields nothing.

If there's no US pivot and inflation continues to rip higher, we're probably looking at the $1,500-$1,600 range as we get into next year, analysts further evaluated. Indicative of sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.28 per cent to its lowest level since March 2020.