Gold prices in Dubai dipped on Friday as oil prices surged past $100 a barrel stoking inflation worries and reinforcing expectations that the US Federal Reserve may keep interest rates high for longer.
The 24K gold rate in Dubai fell to Dh522 per gram down from Dh522.50 the day. The 22K gold rate also dropped, settling at Dh483.50 from Dh483.75.
This decline mirrored a global gold market. Spot gold was trading at around $4,347.47 an ounce down 0.42 per cent. Gold was on track for its straight weekly drop despite a slight recovery on Friday. The metal lost 2 per cent over the week as investors weighed rising energy costs inflation risks and the future path of US monetary policy.
Oil prices were a factor. Brent crude climbed close to $108 a barrel. Was expected to end the week above $100 for the first time since mid-May. Higher oil prices can drive up transportation and manufacturing costs, which may push inflation higher. Persistent inflation could delay central bank rate cuts. Support a more restrictive monetary stance.
Manav Modi, a commodity analyst at Motilal Oswal Financial Services said renewed price pressures—driven in part by energy costs—are reinforcing concerns that inflation could stay elevated.
For gold this creates an environment. While gold is often seen as a hedge against inflation and economic uncertainty rising interest rates make it less attractive. That’s because gold does not pay interest or generate income higher rates reduce its appeal compared to interest-bearing assets.
Investors were also watching US inflation data for signals on the Federal Reserve’s move. Earlier stronger-than-expected producer price data had boosted market expectations for interest rates adding pressure on gold. A stronger consumer inflation report could push Treasury yields and the US dollar higher which would likely weigh further on gold prices.
Geopolitical tensions in the Middle East offered some support. Escalating conflict involving the Houthis and shipping disruptions in Middle Eastern routes have kept oil prices high and increased market volatility. This uncertainty can boost demand for safe-haven assets like gold.
Higher oil prices are a double-edged sword. While they may increase demand for gold as an inflation hedge they also strengthen the case for interest rates—something that can hurt gold performance.
Silver prices were under pressure this week. Gained 0.6 per cent on Friday closing at $63.93 an ounce. Platinum rose 1.2, per cent to $1,798.63 while palladium added 1.4 per cent to $1,299.91.