Gold prices hovered near a three-month low on Friday and were set for their fourth straight weekly decline as the strongest U.S. dollar in two decades dampened demand for dollar-priced bullion.
In the United Arab Emirates, the price of 24-karat gold was 221.25 Dh per gram on Friday, against 223 on Thursday. Meanwhile, the price of 22 carat gold fell to Dh207.75 per gram, 21 carat to Dh198.25 and 18 carat to Dh170 in the UAE. Check the latest gold rates here.
Globally, the spot price of gold rose 0.2% to $1,825.94 an ounce in choppy trade. Earlier in the session, it hit its lowest level since Feb. 7. It was a day after the price of the yellow metal fell by around 1%.
“Gold’s fall from support at $1,835.00 and the selloff in other precious metals overnight leave gold vulnerable to deeper losses and a potential test of support at 1,780.00 $ an ounce,” said OANDA senior analyst Jeffrey Halley.
Costs fall thanks to a strong US dollar
The dollar stabilized near a new 20-year high on Thursday as concerns persisted that actions by the US Federal Reserve to rein in inflationary pressures would dampen global economic growth, boosting the attractiveness of the safe haven currency.
Bullion has lost around 3% so far this week, its highest in two months. Last week, the US central bank raised its benchmark overnight interest rate by a bold half percentage point. Bullion is sensitive to rising short-term interest rates and US bond yields, which increases the opportunity cost of holding it.
“Nominal yields will also climb, creating double-return issues for gold investors, as the U.S. will remain hawkish until inflation indicators fall,” said Stephen Innes, managing partner at SPI Asset Management. The position taken by the United States is expected to set the tone for gold markets around the world.
Gold’s recent tumble wiped out most of the gains made during a rally driven by demand for safe havens ahead of and after the Russian-Ukrainian conflict began in February. The conflict pushed gold prices to near-record highs in mid-March.
The recent fall in gold wiped out most of the gains made during a rally driven by safe-haven demand.
Reeling from Thursday’s defeats
Spot gold fell 0.7% to $1,839.01 an ounce on Thursday. U.S. gold futures, indicative of future prices, were then down 0.7% at $1,841.60.
“The dollar is rallying as things look potentially negative in the US, hurting gold. Additionally, the market realizes the likelihood of seeing fairly aggressive interest rate increases,” said Bart Melek, head of commodity strategies at TD Securities.
The rival safe-haven dollar hit new 20-year highs – making gold less attractive to other currency holders – fueled by fears that tighter monetary policies to tame soaring inflation could hurt the economy world.
“Gold is holding up relatively better compared to industrial precious metals,” the demand for which could be affected in a recessionary environment, Melek added. Gold’s declines, however, were capped by a drop in benchmark government bond yields, which hit a two-week low.
Silver drops too
Spot silver fell 2.1% to $21.11 an ounce – it hit its lowest level since July 2020 earlier in the session.
“Silver is falling faster than gold, this is a bearish sign for the whole complex. With the ongoing lockdowns in China, industrial metals are struggling and the US institutional investor bailing out an ETF on gold by extension also bails out silver,” says independent analyst Ross Norman.
– with contributions from Reuters
