Gold prices rally continued on Wednesday, hitting a new record high after gaining nearly 9 per cent last month.
But is it still the right time for UAE residents and visitors to buy gold and jewellery or prices have peaked?
Analysts predict that gold has been overbought and could see a correction in the short term, but the long-term outlook is still rosy and UAE shoppers should wait for the favourable entry points before buying gold and jewellery.
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Of late, the gold prices have been mainly dictated by the expectations of the US Federal Reserve’s decision to cut interest rates. In March alone, prices rose by around nine per cent. On Wednesday, the 24K variant of the precious metal rose to Dh276.5 per gram on Wednesday morning, a gain of Dh2 per gram from Tuesday’s market close. Similarly, 22K, 21K and 18K touched a new record high on Wednesday, trading at Dh256.0, Dh247.75 and Dh212.5 per gram, respectively.
Globally, spot gold was slightly up at $2,281.8 per ounce at 9.15 am UAE time. It jumped more than one per cent earlier in the day to hit a record high of $2,288 an ounce.
George Pavel, general manager at Capex.com Middle East, said the gold market could be exposed to downside risks over the short term as traders could move to secure their gains after March’s surge.
“At the same time, traders could continue to react to new economic data and central bank comments as they review their monetary policy expectations which could fuel some risks and volatility in gold prices.”
He added the gold price could be exposed to the downside over the short term as traders could view the market as overbought.
“Strong price increases are often followed by corrections that could drive prices lower for a certain time before rebounding again if conditions remain favourable,” Pavel added.
Vijay Valecha, chief investment officer, Century Financial, said amid uncertainty surrounding Federal Reserve interest-rate policy, gold prices may remain range-bound in the near term.
He added that the potential downside risks to gold prices are anticipated to be constrained by various significant factors.
He warned that March 2024 witnessed a remarkable 9 per cent surge in gold prices, surpassing the norm, and such volatility can lead to significant gains or losses.
From a technical standpoint, he said yellow metal appeared to be overbought conditions across daily and weekly charts.
“Despite this, momentum remains robust, making short positions precarious. Traders considering gold should await favourable entry points before entering trades.”
Gold likely to gain in long-term
Vijay Valecha said long-term investors may find it advantageous to purchase gold, even at its current elevated levels.
“While prices could experience a near-term pullback after investing at current levels, resulting in short-term losses, the long-term prospects for gold remain favourable.”
Furthermore, he said the technical analysis indicates a bullish outlook for gold.
“Gold recently broke out of a four-year trading range between $1,600 and $2,070, suggesting potential for further upside in the coming years. Over the past four years, the $2,070 level has served as a significant resistance for gold on three occasions, but it successfully broke through on the fourth attempt. As a result, this level is expected to now serve as a robust support for the metal,” added Valecha.
Over the longer term, George Pavel of Capex.com Middle East sees gold prices continuing to rise, supported by concerns about geopolitical tensions, strong demand, and expectations of a softer monetary policy. “As interest rate cuts materialise, gold prices could see new increases.”