Gold prices in the UAE have hit a record high, with the 24K variant of the yellow metal jumping to Dh296.0 per gram on Monday afternoon. This increase in prices briefly dampened demand for gold jewellery, as shoppers in Dubai typically opt for a wait-and-watch approach when prices hit record peaks. Many residents had already purchased gold jewellery in the previous weeks ahead of the Akshaya Tritiya festival on May 10. Gold jewellers in Dubai reported strong footfall during the festival, with many residents and visitors taking advantage of discounts and sales during this auspicious period.
Despite the temporary drop in demand for gold jewellery, industry executives believe that sales will pick up once the market sees some correction. Gold is considered a safe haven and has a strong appeal among consumers, leading to an eventual return of shoppers during festivals and wedding seasons. Globally, spot gold was trading at $2,422.45 per ounce at 7pm UAE time, after reaching nearly $2,450 earlier due to stronger optimism about interest rate cuts by the US Federal Reserve. Mohamed Hashad, chief market strategist at Noor Capital, attributed the surge in gold prices to increased geopolitical tensions in the Middle East and a broader rally across metal markets.
The ongoing conflicts in the Middle East, along with events such as the helicopter crash of Iranian President Ebrahim Raisi, have contributed to the rise in gold prices. Increased military action between Russia and Ukraine has also supported safe-haven demand, as both nations launched strikes against each other over the weekend. Market participants are closely monitoring cues from the Federal Reserve, with hopes of rate cuts beginning as early as September. Anticipated rate cuts are expected to further support metal prices, particularly gold, as lower interest rates typically increase the appeal of non-yielding assets.
Marc Pussard, head of risk at APM Capital, pointed out that gold has had two tailwinds in the last two years that have propelled its price to all-time highs – global inflation and a flight to safety following the Russian invasion of Ukraine. The market’s obsession with the timing of the US Federal Reserve’s interest rate cuts also plays a crucial role in determining gold prices. A weakening dollar could make gold cheaper for foreign investors, increasing demand and prices. Pussard predicts that gold could break the $2,600 per troy ounce price in the coming months and reach $2,700 by the end of the year. As the market continues to navigate geopolitical tensions and monitor economic indicators, gold prices are likely to remain in focus for investors and consumers alike.
