Gold in the UAE: Buy or Hold? Prices are expected to fall further mid-week, before rising again

Gold prices fell on Monday, weighed down by a rebound in the US dollar and expectations of further interest rate hikes in the US to tame high inflation – a move that will be followed by major economies around the world .

Globally, the price of spot gold fell 0.6% to $1,791.33 an ounce at 07:04 GMT, after rising around 1.6% last week. US gold futures – indicative of short-term prices – fell 0.5%, meaning prices are likely to fall over the coming week.

“Gold looks like some consolidation here for a week or two before resuming the upward march towards $2,000 once again,” said Clifford Bennett, chief economist at Australia-based ACY Securities.

“Gold should be supported around $1,785. A slide to $1,760 cannot be ruled out, but it would represent a fantastic long-term buying opportunity.”

Investors and gold buyers will be watching the minutes from the latest U.S. monetary policy meeting scheduled for Wednesday for more clues about future rate hikes and its impact on gold prices.

Traders were pricing in around a 44.5% chance of a 0.75% U.S. rate hike in September and a 57.5% chance of a 0.50% hike. Although gold is considered an inflation hedge, rising interest rates in the United States are dampening the appeal of non-performing bullion.

“Gold posted its fourth consecutive weekly gain amid easing inflationary pressures. However, these same issues may ultimately turn negative,” analysts at the Australian and New Zealand banking group wrote in a note.

Gold posted its fourth consecutive weekly gain last week as traders weighed further signs of easing inflationary pressures in key economies and hawkish remarks from central bank officials.

The precious metal has now rebounded more than 6% from a low in mid-July on a combination of fears of a global recession and heightened US-China tensions over Taiwan. It has also been helped by the decline in the dollar in recent weeks.

Despite the latest data from the United States, inflation remains stubbornly high around the world. This could force the US Federal Reserve and other central banks to remain aggressive with rates, keeping pressure on gold.

“The price of gold failed to sustainably breach the $1,800 mark this week,” analysts at Commerzbank AG wrote in a note. “The continued tightening of monetary policy continues to have a dampening effect on gold as a non-interest bearing investment vehicle.”

Dorothy H. Lewis