Federal Reserve Policies and Stronger US Dollar Continue to Impact Gold’s Appeal
Gold prices in Dubai have seen a significant drop this week, reflecting broader declines in global rates. On Friday, the price of 24K gold was Dh314.50 per gram, a notable decrease from Dh315.75 on Thursday morning. This marks a weekly loss of more than Dh6 per gram for the precious metal.
Prices for other gold categories also experienced declines, with 22K trading at Dh291.25, 21K at Dh282, and 18K at Dh241.75 per gram. These drops align with the movement in spot gold prices, which were trading at $2,606.65 in early Friday trading.
Market Dynamics Behind the Decline
Rania Gule, a senior market analyst at XS.com, pointed to noticeable fluctuations in gold prices this week. While there was a slight recovery on Thursday, gold rates have been under sustained pressure due to recent market developments.
“After breaking through the neckline of the double top-pattern at $2,613, gold rates returned to the $2,600 levels on Thursday. This followed hawkish statements from the US Federal Reserve,” said Gule.
The Federal Reserve’s recent comments highlighted that inflation risks remain elevated, and economic forecasts suggest limited interest rate cuts in the near term. This policy stance has driven US Treasury bond yields to their highest levels since May, strengthening the US dollar.
Factors Weakening Gold’s Appeal
Gold, a non-yielding asset, faces challenges as rising bond yields make yield-bearing investments more attractive. The strength of the US dollar further weakens gold’s allure as investors seek higher returns.
“In my opinion, this is likely to continue exerting pressure on gold in the near term, especially with rising bond yields,” added Gule. “The strength of the US dollar supports the demand for yield-bearing assets, weakening gold’s appeal as a store of value.”
Looking Ahead
While fluctuations in gold prices are not uncommon, the current economic environment, shaped by Federal Reserve policies and strengthening dollar trends, suggests that downward pressure on gold prices may persist in the near future.
For investors in Dubai, these market dynamics serve as a reminder to stay updated on global trends and monitor local rates closely for potential opportunities.
