Dubai: Gold kept its losses as the escalating Middle East fighting stoked worries that there could be fresh disruptions to energy supplies. This would in turn hold up inflation and make rate increases more likely.
The metal traded close to $4,160 an ounce, having closed the prior session down 0.5%. Brent crude sat near $106 a barrel. Washington is facing growing calls to assist its ally after Iran-backed Houthis struck Saudi Arabia’s main airport.
Gold has shed roughly 20% since the US-Iran war began in late February. The conflict pushed inflation higher worldwide and prompted central banks to tighten policy. Rising borrowing costs usually weigh on gold, because it pays no interest.
In the UAE, prices of gold have cooled-off slightly, with 24-karat gold trading at Dh502.75 versus its opening of Dh505 the previous day. 22-karat is Dh465.50 while 18-karat trades at Dh382.50. It's the light-weight, everyday use 14-karat which has fallen below the Dh300 mark again trading at Dh298.25 this Tuesday.
Traders are watching Wednesday’s US inflation data for hints on where the Federal Reserve goes next, a month after it tightened policy. Swaps markets put the odds of a hike at this month’s meeting at about 20%. They also price in one increase before the year ends.
Interestingly, speculative interest in gold is cooling. The COMEX net long fell 8% to a three-month low of 115,000 contracts. Long-horizon investors are still adding through ETFs, and their purchases have lifted total holdings to the highest level in four years.
“The contrast may suggest that ETF investors are increasingly looking beyond immediate monetary-policy headwinds from elevated bond yields and a stronger dollar, focusing instead on longer-term fiscal and debt sustainability concerns,” said Ole Hansen, Head of Commodity Strategy, Saxo Bank based on the Commitments of Traders report (COT) report.
Spot gold has edged slightly higher at $4192 or 0.63 per cent at 10:00 am Dubai time. Silver too has gained trading at $60.57 up 0.54 per cent. Platinum and palladium followed suit, while the Bloomberg Dollar Spot Index held nearly flat with a small decline.