Gold jewelry on display in a shop window in the Gold Souk in the Deira district of Dubai, UAE. Image Credit: Bloomberg

Dubai: Gold prices rose on Monday after last recording their worst week since late November. Prices were ticking up as the Russia-Ukraine crisis showed no signs of abating, but analysts foresee costs not rising as much in the weeks preceding the start of Ramadan.

In the UAE, the cost of 24-karat gold was at Dh233.50 per gram on Monday, up from Dh232.75 on Friday. Check the latest gold rates here. Meanwhile, the price of 22-karat gold fell to Dh219.25 per gram, 21-karat to Dh209.25 and 18-karat to Dh179.50 in the UAE.

Gold prices were lifted by demand for the safe-haven metal as the Ukraine crisis showed no signs of abatement, although the gains were capped by the US' plan of aggressive measures to combat inflation.

Spot gold rose 0.2 per cent to $1,924.45 per ounce. US gold futures, indicative of future price movements, were down 0.3 per cent at $1,924.00.

"A little bit of safe-haven flows (are) going into gold today because Ukraine officially rejected the deadline from Russia," said Matt Simpson, senior market analyst at City Index.

Higher interest rates tend to raise the opportunity cost of holding non-interest paying gold.

Russia-Ukraine war intensifies, gold rises

Ukraine on Monday rejected Russian calls to surrender the port city of Mariupol, where residents are besieged with little food, water and power and fierce fighting shows little sign of easing.

Preventing further gains in the metal, two of the Fed's most hawkish policymakers said on Friday the central bank needs to take more aggressive steps to combat inflation. Higher interest rates tend to raise the opportunity cost of holding non-interest paying gold.

Holdings of the world's largest gold-backed exchange-traded fund, SPDR Gold Trust, rose 0.8 per cent to 1,082.44 tonnes on Friday - a high since March 2021.

The metal is responding better to the events unfolding in Ukraine, "because with Ukraine officially saying no to Russia, it puts peace talks on the back foot and of course that brings further concerns over supplying constraints moving forward," Simpson added.

With such high inflation permeating across the world, recently increased by geopolitical tensions in Europe, central banks have been stepping up.

This past week, the US began its rate hike cycle as England continued its own. Gold prices are typically viewed as an anti-currency (real or fiat) instrument, given that the yellow metal has no inherent yield for traders holding on to it.

Will gold prices keep rising ahead of Ramadan?

Dubai-based commodity analysts evaluated how gold prices globally are expected to trade in the range of $1,910 per ounce in the week ahead, with future movement largely dependent on how rapidly the US central bank pursues further rate hikes, or whether it errs on the side of caution.

The yellow metal initially soared with the recent escalation of the Ukraine-Russia tension, as well as fresh economic fears from China, before steadying. Also challenging the market sentiment is the increasing covid numbers in China and a suspension of trading in Hong Kong by the troubled real estate firmer Evergrande.

The ongoing Ukraine war has also pushed up commodity prices, from crude oil to wheat and metals. Rising inflation also bolstered the appeal of gold because it is widely perceived as a store of value and hedge against rising costs as well.

Gold prices weakened about 3.5 per cent in the worst weekly performance since June 2021 despite a surge in the yellow metal that initially occurred amidst the outbreak of Russia’s attack on Ukraine. But what does this mean for prices in the week ahead?

Gold can be seen aiming lower in recent days as the US dollar climbed, but markets will be closely gauging their thoughts on inflation and Ukraine. Moreover, the week ahead is relatively light in terms of economic event risk, placing the focus for gold.