The price of 24K gold increased by Dh1 on Tuesday after falling Dh18.50 from its July peak.
Dubai: Gold prices in Dubai edged higher on Tuesday morning, but rates remained close to their lowest levels of the month after a sharp decline over the previous week.
The 24-karat gold price increased by Dh1 to reach Dh484.50 per gram at 9:27 am, compared with Dh483.50 on Monday. Meanwhile, 22-karat gold also rose by Dh1, climbing to Dh448.75 per gram from Dh447.75 in the previous session.
The slight increase provides only limited relief for buyers, as local gold prices have declined significantly since the first week of July. The 24-karat gold rate is now Dh18.50 below its monthly peak, while 22-karat gold has fallen Dh17.25 from its highest level this month.
Prices remain near July low
Dubai’s 24-karat gold price started July at Dh489.75 per gram before rising above the Dh500 mark on July 3. It reached Dh503 per gram on July 4 and remained at that level the next day, marking the highest price recorded so far this month.
Gold prices then started to decline, slipping to Dh499 on July 6 and Dh493.50 on July 7. A short-lived recovery saw the 24-karat rate rise to Dh497.25 on July 9, but the gains were not sustained.
The 24-karat variety was priced at Dh496.50 over the weekend before dropping Dh13 to Dh483.50 on Monday, marking its lowest level in July. Tuesday’s Dh1 increase kept the price only slightly above the monthly low.
A similar trend was observed in 22-karat gold, which rose from Dh453.50 on July 1 to a monthly peak of Dh466 on July 4 and July 5. The rate later declined to Dh447.75 on Monday before edging up to Dh448.75 on Tuesday morning.
Energy costs weigh on bullion
International gold prices stabilised near $4,020 an ounce after a two-day decline, following a 2.9 per cent drop on Monday. Rising tensions between the US and Iran pushed oil and European natural gas prices higher, sparking concerns that increased energy and transportation costs could fuel persistent inflation.
A sustained rise in inflation could increase the likelihood of tighter US monetary policy, which typically puts pressure on gold prices as the metal does not generate interest.
Federal Reserve Governor Christopher Waller said policymakers may need to raise interest rates in the near term if underlying inflation continues to signal widespread price pressures. Market expectations for a quarter-point rate increase later this month have climbed to around 50 per cent, compared with less than 10 per cent earlier.
“In the July 13 session, gold posted its second consecutive decline. Prices moved back towards the key psychological level of around $4,000 per ounce as tensions in the Middle East unexpectedly intensified once again,” said Linh Tran, Market Analyst at XS.com.
Oil prices climbed to their highest levels in about a month at the start of the week amid concerns that shipping activity through the Strait of Hormuz could be disrupted. The resulting inflation concerns have overshadowed some of the traditional safe-haven support that geopolitical uncertainty usually provides to gold.
“Rising interest-rate expectations are directly weighing on gold because the precious metal does not offer a fixed yield,” Tran said.
The US dollar has also strengthened due to higher rate expectations and increased demand for safe-haven assets. The US Dollar Index remained around 100.9 to 101.0, making gold more expensive for buyers using other currencies and limiting the metal’s recovery.
$4,000 support faces another test
Gold has extended its decline in July after dropping 14 per cent in the second quarter, marking its weakest quarterly performance since 2013. Expectations of tighter Federal Reserve policy have boosted the dollar and Treasury yields, while holdings in gold-backed exchange-traded funds fell to their lowest level since September last week.
“The $4,000 level remains a key psychological threshold. Gold has fallen below this mark several times in June and the first half of July, but it has quickly recovered on each occasion. This suggests that buying interest continues to emerge at lower price levels, although the market’s ability to maintain this support is facing increasing pressure,” Tran said.
Investors will closely monitor the US Consumer Price Index (CPI) report for June and Federal Reserve Chairman Kevin Warsh’s first appearance before Congress on Tuesday for further indications about the future path of interest rates.
Markets are expecting core consumer inflation to rise by around 0.2 per cent month-on-month. A stronger-than-expected reading could boost expectations of another rate hike, putting additional pressure on gold prices. Conversely, softer inflation data could weaken the dollar and Treasury yields, potentially supporting a recovery in bullion.
