Gold prices were steady in Dubai at the start of the week as the Indian festival of Navratri began on Sunday.
According to Dubai Jewellery Group data, 24K gold was trading at Dh505.5 per gram on Monday, while 22K, 21K and 18K gold were priced at Dh468, Dh448.75 and Dh384.75 per gram, respectively.
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The 14K variant, the most affordable type of gold, was trading at Dh300 per gram on Monday morning.
Navratri, the nine-day Indian festival, is considered an auspicious period for gold purchases. Many people buy gold jewellery, coins and bars during the festival, viewing them as symbols of prosperity, wealth and good fortune. Retailers often witness increased demand as families make festive purchases and investments.
Spot gold was down 0.16 per cent at $4,188 an ounce, while silver slipped 0.14 per cent to $223.55 an ounce.
Simon-Peter Massabni, head of business development at XS.com, said gold was entering a pivotal phase, trading near $4,185 per ounce as it attempted to reclaim the $4,200 level.
“One of the first factors supporting gold is the weakening US dollar and the decline in Treasury yields, both of which could give the precious metal more room to recover. A weaker dollar makes gold cheaper for holders of other currencies, while lower yields reduce the opportunity cost of holding an asset that doesn't generate regular income. However, I expect these supportive conditions to hold only if yields continue to move lower. If the dollar regains strength and Treasury yields rise again, gold could quickly lose much of its recent momentum,” he added.
According to Massabni, the US Consumer Price Index (CPI) report due this week is the most important factor in determining gold’s next move.
“Markets are not monitoring inflation as an isolated economic indicator, but rather as a key determinant of expectations for the Federal Reserve’s monetary policy. If inflation comes in below expectations, bets on tighter monetary policy could ease, and yields could decline, creating a more favourable environment for gold to extend its gains.”
Conversely, if the data reveal more persistent inflationary pressures, expectations of further interest rate hikes could resurface, potentially pushing the dollar and yields higher and putting renewed pressure on the precious metal, he added.
Massabni expects volatility to increase ahead of the report’s release, and the market’s reaction to any inflation surprise will likely matter more than gold’s current price movements.