Dubai gold slumps to 8-week low

Spot gold prices slumped to $1,634.54 per ounce in after-hours trade yesterday and were only slightly better at $1,643/oz this afternoon at 5.15pm UAE time (1.15pm GMT) on a firmer dollar and improving investor sentiment.

Gold is now down over $150 per ounce – or more than 9 per cent – in two weeks, and analysts believe that lack of news on further quantitative easing coupled with an improving US economy – which encourages investors to move into more riskier assets – is pushing the yellow metal down.

In Dubai, gold prices declined to an eight-week low, with a gram of 24ct gold slumping to Dh196.25, with 22ct gold retailing at Dh184.50/gm, and 18ct down to Dh150.50/gm.

With the recent decline in the global gold price, retailers in the city of gold are hoping that jewellery buyers, who seemed to have shunned shopping of late due to relatively high prices, would make a comeback.

“There was a relative lull since the beginning of this month, when prices started going up, but we have seen footfalls and sales increase remarkably since yesterday, and I hope to see solid sales over the weekend, said the store manager of a Mall of the Emirates outlet of a large jewellery chain, who did not wish to be named as he isn’t authorized to speak to media.

Technically, gold has broken its 200-day moving average ($1,674/oz) on the downside, but remains well above its critical support level of $1,624/oz. With global gold prices literally in no-man’s land, gold could make a move either way from here.

A move below $1,624/oz will see major support under $1,600/oz (around the $1,598/oz level), while any move on the up will see key resistance at $1,727/oz.

“Gold is moving towards our target of $1,650, and while we believe that it could fall towards $1,630, we are increasingly seeing value in the metal,” Standard Bank analyst Walter de Wet said in his daily precious metals report yesterday.

“With the dollar strengthening, we would not be surprised to see gold push even lower, towards $1,630. However, when gold sells off like it did in the past few weeks, we turn to the underlying fundamentals that we believe drives gold in the long run,” he said.

“We believe that gold is driven by two key drivers — global liquidity and real interest rates. We believe that both are still favourable for gold to remain on a structural upward trend,” de Wet added, explaining the reasons why the current slump might reverse.

Until then, of course, bargain gold buyers can have a field day.

Follow Emirates 24|7 on Google News.