Dubai gold prices steady as 24K trades below Dh500 per gram

Gold prices in Dubai held steady on Tuesday morning, with traders and investors closely watching for direction from the upcoming US Federal Reserve minutes. The benchmark 24K gold price opened the day at Dh499 per gram. Other gold varieties also saw consistent trading, with 22K at Dh462, 21K at Dh443, 18K at Dh379.75, and 14K at Dh296.25 per gram.

Spot gold was trading slightly lower, down 0.67% at $4,130 per ounce on Tuesday morning. Last week, gold experienced a rally, largely interpreted as a market reaction to comments from US Federal Reserve Chairman Kevin Warsh, which were perceived as less hawkish than anticipated. This led to lower US Treasury yields and a slight weakening of the US dollar, boosting gold prices towards the $4,200 mark as investors scaled back expectations for aggressive monetary tightening.

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In my view, gold is likely to remain under pressure, with elevated yields continuing to cap demand. That said, the outlook looks considerably brighter than earlier in the past few weeks, when the market was eyeing a move towards the $3,900 range.

While gold has relinquished some of its recent gains, the overall sentiment for the yellow metal remains modestly positive after weeks of significant selling pressure. Analysts note that US Treasury yields continue to be the primary driver of gold prices, as markets have reduced their expectations for a rate hike this year. However, elevated yields are expected to continue capping demand for gold.

Ahmad Assiri, a research strategist at Pepperstone, commented that while gold is likely to face continued pressure from high yields, the outlook appears considerably brighter compared to the preceding weeks when the market was anticipating a move towards the $3,900 range. Assiri highlighted the ongoing volatility in the yield curve, driven by uncertainty surrounding Federal Reserve Chairman Warsh's policy outlook due to his continued avoidance of forward guidance. This uncertainty directly impacts gold prices.

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At the core of this, markets still cannot pin down Warsh's policy outlook, as he continues to avoid providing forward guidance, hence introducing high volatility into the yield curve and, in turn, the metal.