The so-called relief rally on global markets ended yesterday almost as quickly as it emerged, reflecting ongoing concern about the health of the world's biggest economy.
Gold initially fell after Barack Obama, the US president, and congressional leaders hammered out a compromise late on Sunday to raise the country's US$14.3 trillion (Dh52.52tn) debt ceiling by more than $2tn.
However it was back to near-record highs by midday yesterday, hitting $1,628 an ounce.
Stock markets around the world tumbled as traders worried about the possibility of a credit rating downgrade for the US.
Just 24 hours earlier the same markets had risen on renewed optimism about the state of America's finances.
Brent crude, meanwhile, rose $1.33 to $118.14 a barrel in trading yesterday as the dollar weakened.
Economists at Emirates NBD, the UAE's largest bank, wrote in a note to clients that economic indicators pointed to a rough road for recovery in the US as manufacturing activity stagnated despite the debt deal.
"The good news on the debt deal was overshadowed by weaker than expected manufacturing data out of the US," the bank said. "The [Institute for Supply Management] Manufacturing Index dropped to 50.9 from 55.3 in June … against expectations of 54.5, indicating that the manufacturing sector barely expanded last month.
"The weak number reignited concerns over US and global growth prospects, particularly as the world's largest economy moves to tighten fiscal policy."
The US jobless rate, meanwhile, is still above 9 per cent as of last month, and the country faces the prospect of a credit-rating downgrade even after the compromise deal, which passed the US House late on Monday and was expected to go to the US Senate yesterday.
Spending cuts in the compromise debt deal fell short of what ratings agencies hoped to see. Standard and Poor's, one of the world's biggest ratings agencies, has indicated it could downgrade the US's top "AAA" rating if spending cuts did not reach about $4tn.
Marwan Shurrab, an assistant fund manager and chief trader at Gulfmena Investments in Dubai, said the relief rally was short-lived because prevailing problems in the manufacturing sector and general global volatility. As the US tries to cut spending - a move that could curtail financial aid packages to Middle Eastern countries - Europe is still battling through its own debt crisis.
"The expectation was that most regional and international markets would benefit from a relief rally, but unfortunately some numbers came out indicating that growth and recovery is at risk due to industrial activity coming out lower than expected," Mr Shurrab said.
Local markets in the Gulf are also expected to feel the sting of global volatility, although some observers suggest the region could benefit if investors start moving money out of developed-market assets as a result of debt-fuelled turmoil.
Stock market indexes in both Dubai and Abu Dhabi were up slightly yesterday.