Larger gold price reductions this week –

Dubai: Gold will continue to edge lower this week due to the recent volatility, with retail prices in Dubai expected to post more reductions larger than just Dh4, an industry expert told Gulf News on Thursday.

The precious metal’s retail prices in Dubai dropped further on Thursday, with the 24-carat selling at Dh134.75, down from Dh135 on Wednesday. The price for 22K dropped from Dh128.50 to Dh128.25 while 18K fell from Dh106.50 to Dh106.25.

Karim Merchant, CEO and managing director at Pure Gold Jewellers, said he expects a spike in jewellery sales in Dubai once prices post significant declines.

He said a critical factor that could seriously impact gold prices is the decision of the United States Federal Reserve on interest rates. If the rates increase, the bullion could dip to as low as $800 an ounce.

“Given the recent volatility, consumers expect to see a larger drop than Dh4 and this will trigger a spurt in retail good sales,” Merchant told Gulf News.

“I personally believe that the current gold price movement has already discounted Fed decision. However, if the interest rates continue to increase,  gold could test new lows of price level and may attempt to test the $800 level. For now, upside seems limited.”  

However, while the Fed decision is not out yet, spot gold has increased a bit, posting a 0.2 per rise to $1,120.95 an ounce as of 0638 GMT, near a one-week high of $1,124.30 reached in the previous session, according to Reuters.

The uptick has been attributed to the weak US inflation figures which are seen to have dampened concerns that the Fed will push for the rate increase.

The Bureau of Labour Statistics reported on Wednesday that the consumer price index in the US dropped 0.1 per cent in August.

Merchant said it is now more unlikely for the Fed to hike the rates, citing that the US “has a global responsibility in lieu of the interest rate” adjustment. “I do not expect them to increase it further.”

ABN Amro had earlier said it expects the gold price to continue dropping this year. The bullion is forecast to trade hands at $1,000 an ounce by December 2015 and $800 an ounce by December 2016.

Gold Rate: To keep up to date with gold prices, go to our gold rate page.

Currency Rate: To keep up to date with latest exchange rates, go to our currencies page.