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28 March 2024

Gold below $1,610 on Eurozone concern

Published
By Vicky Kapur

Will they, won’t they? Investors alarmed at euro zone politicians’ inability to commit to a firm bailout plan for Greece once again turned to the safety of US dollars and, in the process, dumped gold again – the fifth time in six sessions that the metal has lost value.

As doubts over European nations’ earnestness in recapitalising the regions’ banks grew, gold fell in early trade on Wednesday, after its first rebound in five days the previous day.

Spot gold prices tumbled 2.6 per cent, or almost $43 per ounce, today after making an intra-day high of $1,666.12 in the morning, and were trading at $1,607.64 per ounce at 10.00pm UAE time (18.00 GMT), but still more than $75 per ounce above the flash low of $1,531.90 that the metal made on Monday morning.

The metal, which made its lifetime high of $1,920.30 per pounce just three weeks ago on September 6, has seen investor interest wane as they seem to be preferring the greenback’s safety over the bullion’s in a somewhat contra- intuitive mode.

The dollar index increased 0.15 per cent to 77.89, after two days of declines. The dollar has been gaining strength over the past few weeks, and with it, every commodity priced in US dollars – oil and precious metals included – have been losing value as they become less attractive for investors holding other currencies.

Gold is now down about $313 per ounce, or over 16 per cent, from its all-time peak made earlier this month, even as a section of experts, that had been warning of a violent correction for some time, now saying that the current price is attractive.

Spot gold prices, which had shot up more than 33 per cent year-to-date by the first week of September, are now up less than 20 per cent YTD after the recent corrections.

With the Euro zone crisis worsening in the past week – a Greek tragedy now seems imminent, with the market pricing a more than 94 per cent probability of default, according to CMA’s Sovereign Risk Monitor – investors have, uncharacteristically, skipped gold and seem to have developed a liking for the greenback, which has appreciated substantially in the past months.

The euro has been weakening ever since the second round of trouble at some of Euro zone’s economies has come under the spotlight. The primary beneficiary of the recent events has been the US dollar despite America, the world’s largest economy, itself looking for options to bridge an almost unmanageable funding deficit.

In the UAE, prices of 24ct gold are down more than Dh31 per gm from the peak to Dh227.50 per gm, and were retailing at Dh196.50 this morning, according to prices supplied by the Dubai Gold & Jewellery Group. 22ct gold is retailing at Dh184.75/gm while 18ct gold is being sold at Dh150.50 per gm.