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The yellow metal has traditionally been considered a hedge against inflation, but higher interest rates have dampened its appeal
AFP file photo
Gold prices fell in the UAE and globally on Thursday morning after U.S. Federal Reserve Chairman Jerome Powell signaled further rate hikes next year.
Spot gold was down 0.93% at $1,790.83 an ounce by 9:05 am UAE time.
In the UAE, 24K gold prices opened at Dh217 a gram on Thursday, compared with last night’s close of Dh219.25. Likewise, 22K, 21K and 18K also opened at Dh201, Dh194.5 and Dh166.75 per gram respectively.
U.S. Federal Reserve Wednesday Announced another 50 basis point increase in interest on reserve balances (IORB). Banks in the UAE and elsewhere have followed suit.
Powell said on Wednesday that even if the U.S. economy slides into a possible recession, the Federal Reserve will still raise interest rates more times next year, and said that if the central bank does not tighten its grip on inflation, it will pay a higher price.
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Christopher Wong, currency strategist at OCBC Bank, told Reuters that a hawkish Federal Reserve is weighing on the gold market and that the outlook for gold depends on the extent to which central banks, especially the Fed, plan to tighten policy further.
“I’m still bullish on gold trading higher broadly through 2023, but I wouldn’t rule out any profit-taking or price pullback in the near term to year-end.”
Gold has traditionally been considered an inflation hedge, but higher interest rates increase the opportunity cost of holding the non-yielding metal, reducing its appeal.
“We see room for some retracement of gold’s recent gains, but expect safe-haven buying to push prices higher. We subsequently raised our end-2023 target to $1,900 an ounce,” ANZ said in a note.
waheedabbas@khaleejtimes.com
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