Gold prices in Dubai were stable on Monday morning after slipping below Dh500 per gram on Monday evening.
According to data by Dubai Jewellery group, the 24K gold price was trading at Dh497.25 per gram at the market open on Tuesday.
The other variants, 22K, 21K, 18K, and 14K, also dropped further, trading at Dh460.5, Dh441.5, Dh378.5, and Dh295.25 per gram, respectively.
Globally, gold fell 0.2 per cent to Dh4,127.6 per ounce, while silver dropped by 1.27 per cent to $60.56 per ounce as of 9:08am UAE time.
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Both metals’ weakness reflect a combination of surging bond yields, a stronger dollar and technical selling following the support break, Head of Commodity Strategy at Saxo Bank, Ole Hansen, said.
“The pressure from rates is becoming increasingly difficult to ignore,” he said, explaining that US 10-year real yields have climbed to an 18-year high near 2.85 per cent, while short-term interest-rate markets are now pricing another three 25-basis-point Fed hikes by next April.
“Traditionally, such a sharp increase in the opportunity cost of holding a non-yielding asset would be a major headwind for gold,” he added.
The analyst said that focus will remain on ETF flows, especially from investors who seem less sensitive to interest rates and more concerned about the financial consequences of persistently high borrowing costs.
“Higher yields may hurt gold through the traditional valuation channel, but they also increase fiscal strains and debt-servicing costs, potentially strengthening longer-term demand for gold as protection against financial and sovereign risk,” Hansen said.
He continued, “Funding stress could, however, become a short-term headwind. Signs of stress are emerging at the weaker end of US corporate credit as higher rates increase refinancing risks. Triple-C spreads have widened sharply, while the gap to B-rated debt has reached levels previously associated with major economic slowdowns. More broadly, the spread between high-yield US corporate bonds and US Treasuries widened another 12 basis points on Friday to 294 basis points, the highest since April.”
Source: Khaleej Times