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Time to buy? Dubai gold prices drop Dh5 per gram

Analysts expect the prices will recover in the coming weeks and months on Fed rate cut expectations and global uncertainties

Published: Fri 19 Jul 2024, 2:18 PM

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Photo: AFP file

Photo: AFP file

Gold prices plunged in Dubai on Friday, falling Dh5 per gram in early trade.

The Dubai Jewellery Group data showed 24K trading at Dh293.50 per gram on Friday morning compared to Dh298.50 per gram at the close of the markets on Thursday. Rates for the other variants of the precious metal also fell: 22K, 21K and 18K were trading at Dh271.75, Dh263.25 and Dh225.50 per gram, respectively.

In Dubai, gold prices crossed Dh300 per gram earlier this week on expectations of the US Federal Reserve cutting interest rates in September.

Globally, spot gold was trading at $$2,415.05 per ounce, down 1.1 per cent due to profit-taking.

[Editor's Note: For real-time gold rates, click on the widget below or visit KT's dedicated Trading News page here.]

Kelvin Wong, a senior market analyst for Asia Pacific at Oanda, said the yellow metal is seeing some profit-taking after the recent rally. He added that the outlook for the yellow metal is positive in the medium term due to political uncertainty and rate cuts.

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Analysts expect the prices will recover in the coming weeks and months on Fed rate cut expectations and global uncertainties

Antonio Ernesto Di Giacomo, market analyst at xs.com, said gold prices reached historic highs on July 17, driven by optimism that the Federal Reserve will cut interest rates in September.

The price reached $2,483.00 per ounce, surpassing market expectations and reflecting growing investor confidence in future monetary policies.

“This remarkable increase is mainly due to expectations of interest rate cuts, a key factor influencing the behaviour of financial markets. The expectation of interest rate cuts has been fostered by weak Consumer Price Index (CPI) inflation data and signals from the Federal Reserve pointing to a moderate trend. Investors have been attentive to economic indicators suggesting a cooling of the US economy. In this context, the possibility of an interest rate cut has been seen as necessary to stimulate economic growth and control inflation, factors that have driven demand for gold as a safe haven,” he said.

According to the CME Fedwatch, there is over a 90 per cent probability of a 25-basis-point cut in September.

“This high probability has been a significant catalyst for the rise in gold prices. Investors believe a lower interest rate environment will increase demand for gold and other precious metals as the opportunity cost of investing in these assets decreases. Confidence in an imminent rate cut has led investors to seek refuge in gold, pushing its price to record levels,” he added.

“With a high probability of a rate cut in September, gold demand will likely remain strong soon, consolidating its position as a safe asset in times of economic uncertainty,” said Antonio.

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