Gold prices touched the lowest in more than one week on Thursday, as the dollar stood firm on rising US Treasury yields, with investors focusing on who would replace Janet Yellen as the next chair of the Federal Reserve.
In Dubai, 24k gold is priced at Dh155 while 22k can be brought at Dh145.75.
The slash in the gold prices is likely to spur the sale of gold this Diwali in Dubai. Buying gold in the form of jewellery or coins is considered auspicious in the Hindu tradition.
Meanwhile, spot gold was down 0.2 percent at $1,277.86 an ounce as of 0347 GMT after earlier hitting its lowest since Oct. 9 at $1,276.44.
US gold futures for December delivery fell 0.3 percent to $1,279.80 per ounce.
“Depending on how the dollar goes, we might look at $1,250-60 as the next stop for gold to trade down. We don’t see immediate upward catalyst for gold except for North Korea,” said Richard Xu, a fund manager at China’s biggest gold exchange-traded fund, HuaAn Gold.
The dollar hit its highest in about two weeks versus the yen , supported by this week’s rise in US bond yields, with US President Donald Trump set to make a decision in the “coming days” on Yellen, who is also one of the five candidates being considered for the job.
US short-dated treasury yields jumped on expectations of tighter global monetary policy.
Higher interest rates tend to boost the dollar and push bond yields up, putting pressure on gold by increasing the opportunity cost of holding non-yielding bullion.
The economy expanded at a modest to moderate pace in September through early October, despite the impact of hurricanes on some regions, the Fed said its latest snapshot of the US economy.
“Looks like fundamentally the (U.S.) economy is doing pretty well, so that will also put downward pressure on gold,” Xu said.
Spot gold may drop more to $1,263 per ounce, as it has cleared a support at $1,281, Reuters technicals analyst Wang Tao said.
An overhaul of the US tax code to make it simpler and more broad-based should foster business investments and productivity, boosting overall domestic economic growth, said New York Federal Reserve President William Dudley on Wednesday
In other precious metals, silver slipped 0.2 percent to $16.94 an ounce, while platinum fell 0.4 percent to $914.50 an ounce and palladium was up 0.8 percent at $960.10 an ounce.
Platinum and palladium hit one-week lows earlier in the session.