Investors and gold enthusiasts were in for a surprise as gold prices dropped by Dh0.75 per gram at the opening of the markets on Tuesday (May 21), after experiencing a significant surge in the previous session. The 24K variant of gold was trading at Dh292.25 per gram at 9am UAE time, down from Dh293.0 per gram at the close of the markets on Monday. Other variants, including 22K, 21K, and 18K, were selling at Dh270.5, Dh261.75, and Dh224.5 per gram, respectively. On Monday, the 24K variant had reached Dh296 per gram, showing fluctuations in the market.
Globally, gold was trading at $2,414.41 per ounce, down by 0.5 per cent at 9.10 am UAE time. The drop in gold prices can be attributed to encouraging data on the US inflation front, leading to speculation that the Federal Reserve might ease its monetary policy sooner than expected. This has had an impact on precious metals, with gold nearing its all-time high. Experts suggest that the recent rally in gold prices may have hit a temporary peak, affecting central banks and investors alike.
Analysts at Julius Baer point out that the narrative of central banks switching from US Treasuries to gold has been a driving force behind the recent rally in gold prices. Gold’s record-breaking rally can be explained not by an increase in global gold demand but by buyers’ increased willingness to pay. Central banks have been increasing their holdings of US Treasuries, except for China and Russia, who have been ramping up their gold purchases. Gold continues to serve as a hedge against economic and systemic risks in financial markets.
The Swiss bank’s analysts predict that the recent surge in gold prices may have stagnated for the time being, as global gold demand has remained stagnant over the past decade. Despite this, gold remains a preferred investment option due to its ability to hedge against economic uncertainties and fluctuations in financial markets. Experts believe that the recent trend of central banks diversifying their assets by investing in gold instead of US Treasuries has bolstered the precious metal’s value in the market.
In conclusion, the drop in gold prices at the opening of the markets on Tuesday signifies a shift in the dynamics of the precious metal’s value. Factors such as encouraging inflation data in the US and speculation surrounding the Federal Reserve’s monetary policy have impacted gold prices globally. While the recent rally in gold prices may have hit a temporary plateau, the metal continues to serve as a reliable hedge against economic risks. The trend of central banks diversifying their assets by investing in gold adds further support to the precious metal’s value in the market. Investors and enthusiasts will be closely monitoring market trends to capitalize on potential opportunities in the gold market.
