Dubai gold prices fall as dollar firms up

15/06/2016 06:35 AST

Gold prices in Dubai declined on Tuesday after climbing to five-week highs on safe haven demand from investors reacting to the upcoming referendum on UK’s exit from the European Union.

Retailers in Dubai were trading 24-karat gold for Dh155 per dirham as of 2.37pm, down by .5 per cent from yesterday’s close. Compared to a week ago, however, 24K posted a Dh4.25 or 3.3 per cent gain.

In the Asian market, spot gold dropped 0.4 per cent at $1,278.56 an ounce by 1000 GMT as the US dollar strengthened, according to Reuters. The precious metal hit a peak of $1,287 on Monday, its highest since nearly a month ago.

Rolf Schneebeli, CEO of Gold Services AG, described the latest price movement as a “small correction”, adding that the fundamentals remain unchanged and that “the bulls seem to get the upper hand in the gold market again.”

“We still have a weakish global economy resulting in an interest rate environment which remains favourably low and also, due to the fact that China shows signs of continuously slower than expected growth rates, a weaker physical retail demand than expected,” Schneebeli told Gulf News.

“However, the fear factor is getting is getting much stronger now again. There are two things influencing this right now: the upcoming Brexit vote in the UK putting a shadow over the European development and a report about Mr. Sorros, the well-known hedge fund operator [reducing his stock market exposure and getting into gold].”

“While he is not buying bullion, he has done that by buying stock of Barrick Gold, one of the largest gold producers. As buying gold stocks is more volatile than buying bullion, this is a very positive sign for gold.”

A vote for UK’s exit can have negative implications for the European economies and there’s a likelihood that demand for gold, as well as Swiss Francs, would again rise. “If the British vote to stay, we will see a stronger Euro, weaker Swiss Franc and also weaker gold,” Schneebeli added.

Gulfnews