Gold nears Dh500 as dollar slips after US midterms

Dubai: Gold pushed higher again after surging more than 3 per cent on Wednesday. A Democratic sweep of Congress in the US midterms pulled the dollar and Treasury yields down. Bullion rose as much as 2.1% to trade near $4,146 an ounce, after rising the most since August in the previous session to back above the $4,000 support threshold.

In the UAE, 24-karat gold is inching back to Dh500 levels in the UAE. Retailers priced the metal at Dh498.50 per gram on Thursday, November 5. The 22-karat variety sold at Dh461.75 versus the Dh451.50 the previous session. 18-karat is being priced at Dh379.50 and 14-karat at Dh296, nearing the Dh300 mark.

Prices are likely to gain from here. Yesterday’s US midterm results weakened the dollar. Oil has dropped to $93 per barrel. India’s festive season is approaching, a period that typically lifts jewellery demand from Indian buyers in the UAE.

A Democratic sweep of Congress is what has driven the move. The dollar and Treasury yields fell as investors bet the Trump administration’s tax and spending plans may face limits. Lower yields help gold because it pays no interest. A weaker dollar makes it cheaper for buyers holding other currencies.

Oil added to the support. Brent crude fell below $100 on Wednesday for the first time since early October after President Donald Trump played down the prospect of strikes on Iran. Cheaper energy eases inflation fears and the case for tighter Federal Reserve policy.

The rebound follows a long slide. Linh Tran, Market Analyst at XS.com, notes the scale of the damage. “Gold has declined nearly 6.5% since the beginning of the year and lost nearly 28% from the peak established in mid-February.”

Tran points to a recovery above a key level. Gold dropped to about $3,870 an ounce before climbing back over $4,000. “Reclaiming an important psychological level only helps reduce immediate pressure,” she says.

Her outlook has a caveat, she says “If investment flows and yields keep supporting the metal, gold could stabilize above $4,000 and open the way to $4,200, then $4,400. Failure to hold $4,000 would point to a drop toward $3,600. “This is a conditional scenario, not a guaranteed bottom,” Tran cautions.

Traders now turn to the US payrolls report due Friday. Signs of contained inflation would give the Federal Reserve room to ease policy. Silver rose 0.60 per cent to $53.54 after a near 5 per cent jump on Wednesday.