Gold and silver prices plummeted in Dubai and globally on Tuesday evening as gold dropped below Dh500 per gram.
Globally, spot gold declined more than 5.3 percent to $4,092 per ounce at 7 pm UAE time, marking the steepest daily fall in five years on Tuesday. It reached a record high of $4,381 per ounce on Monday, while silver fell below $50 to $48.37 at 7 pm UAE time on Tuesday, losing over 7.4 percent.
In Dubai, 24K gold fell to Dh499 on Tuesday evening, losing Dh22.75 in one day. Similarly, 22K, 21K, and 18K gold also slipped to Dh462.25, Dh443.25, and Dh379.75 per gram, respectively.
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The precious metals retreated after a record rally in both gold and silver as the US dollar rose and investors booked profits.
Daniela Hathorn, senior market analyst at Capital.com, mentioned that gold and silver faced a heavy selloff as trade tensions between the US and China eased.
“Gold and silver have been garnering a lot of attention in recent weeks as they staged an impressive rally that led the precious metals to break several record highs. The momentum was driven by a combination of factors, including safe haven demand due to escalating geopolitical tensions and fiscal constraints, expectations of lower rates from the Federal Reserve, and improved fundamentals. However, the upside has run out of steam this week,” she stated.
“The trade had become quite overcrowded and was running a little hot considering the levels both markets were at, so a reversal is not entirely out of the blue. The catalyst for the pullback has been the perception of easing tensions between China and the US after US President Donald Trump said that he expects to make a trade deal after meeting with China’s President Xi Jinping in South Korea later this month,” said Hathorn.
She elaborated that the confirmation of willingness to resolve the US-China issues has been enough to remove some of the risk premia in markets, at least for now.
“Both gold and silver were primed for a pullback so there is likely some profit-taking which has deepened the reaction. The fundamentals haven’t changed, with long-term support still in place, however, the strength of the rally over the past month was somewhat unjustified, leading to the chance of a deeper pullback on the back of this news of positive trade developments,” she said.
For silver, she sees the supply shortage is likely to remain a significant driver in the next twelve to eighteen months as demand from the renewable energy sector is expected to increase.
