DUBAI: Those who bought gold jewellery in Dubai about three months ago or last year may have reason to rejoice, with the precious metal posting a whopping Dh22 increase per gram since the beginning of the year.
Yellow gold continued its climb this week, as investors flocked to safe-haven assets amid times of uncertainty. The price of 24-carat gold in Dubai reached Dh150.75 per gram as of Tuesday, 12.10pm, up nearly 18 per cent from December 31 prices. Analysts have forecast that, as investors continue to seek refuge in safe-haven assets, gold will likely maintain its upward momentum over the short term.
Nevine Pollini, equity analyst at Union Bancaire Privée, said he expects gold to trade in the $1,100 to $1,400 range for the next couple of years. “However, we believe that the strength of the recent rally makes gold vulnerable to profit-taking,” Pollini told Gulf News.
This month, the precious metal registered its biggest jump in a year due to uncertainty in the markets. “The major sell-off in global equities and concerns about banks’ solvency, Deutsche Bank in particular, prompted this safe-haven buying,” said Pollini. “But sentiment on gold has improved mainly as a result of fears of a global economic slowdown and the perception that most central banks will maintain their loose monetary policies.”
Other gold pieces also increased in value, with 22-carat rising to Dh141.50, 21K hitting Dh135 and 18K retailing at Dh115.75 per gram. Ole Hansen, head of commodity strategy at Saxo Bank, said the rise in demand for gold has been triggered by recessionary sentiment. “Recession worries and lower central bank rates have created a degree of positive momentum that has attracted a dramatic influx of funds towards gold holdings in exchange-traded products,” Hansen said.
“The negative correlation to falling stock and oil prices remains a key feature of this trade and any change in sentiment there may for now curb the upside and trigger a period of consolidation.”
Pollini shared the same view, citing that the positive sentiment on gold is a result of “fears of a global economic slowdown and the perception that most major central banks will maintain their loose monetary policies.”
The head of the United States Federal Reserve, Janet Yellen, had repeatedly acknowledged concerns about the weakness of the global economy. She recognised that financial conditions in the US have softened, while the slowdown in China could have a negative impact on the American economy.
“Expectations of further Fed tightening in the next twelve months are now fading. While the Fed still refuses to rule out a further rate hike later this year, it will certainly slow the pace of the increases.
The recently released minutes of the FOMC’s (Federal Open Market Committee) January meeting suggested that the Fed will again leave interest rates on hold at the March meeting,” added Pollini. “We therefore continue to believe that gold will trade in a $1,100 to $1,400 range for the next couple of years.”
