And the gold market in Dubai rose sharply on Tuesday as investors gravitated to the precious metal as tension between the West and Russia and uncertainty about the next policy from the US Federal Reserve fueled demand for gold. Gold prices recovered from a fall in the previous day's session, with 24-karat gold jumping by Dh3.75.
The latest increase comes at a time when global financial markets are at a higher risk level. Iran-US relations have raised fears of a major disruption in the Middle East, for years a key source of energy and global stability. Investors tend to turn to gold at times of high international tension in the world, when stocks are riskier than gold and gold is more easily traded on the world market.
Dubai, one of the world's biggest gold jewellery and bullion shopping markets, often reflects international price moves but also local demand. The sudden rise in prices was felt in jewellery stores in the emirate, where buyers who expected lower rates after Monday’s drop had to pay far more.
The 24-karat gold category saw the largest jump, up Dh3.75 per gram from the closing price of Monday. Other gold variants, 22K, 21K and 18K, also increased, making jewellery purchases more expensive for residents and tourists alike. The increase interrupted what had been a brief downward trend at the start of the week.
Another factor that will help gold prices is uncertainty surrounding the outcome of the US Federal Reserve's interest rate decisions. Investors are waiting and watching future economic indicators to see if the Fed will keep its policy stance or cut interest rates in the months ahead. Lower interest rates typically bring down the opportunity cost of holding a non-yielding option like gold and are thus attractive to investors.
Market analysts note that expectations regarding monetary policy are still the biggest drivers of global gold prices. Mixed economic data from the United States have left markets divided on the timing of any future rate cuts, and thus there is more volatility in financial markets. As uncertainty persists, gold is still an asset in the form of a reliable store of value.
International spot gold prices also gained during overnight trading, supported by a weaker US dollar and increased buying from institutional investors. A weaker dollar tends to make gold cheaper for buyers in foreign currencies, further boosting demand in international markets.
Higher prices always lead to mixed reactions for Dubai's jewellery industry. Some customers simply put off large jewellery purchases waiting for lower prices, and others rush to buy before rates rise even higher. Retailers experience a surge in customer activity whenever gold prices rise.
In the near future, industry experts believe that geopolitical developments will continue to be a significant influence on gold markets. Further conflict between the US and Iran and a further escalation in tension could lead to a surge in demand for gold, driving prices even higher. At the same time, the latest economic data from the US including inflation figures, employment numbers, and Federal Reserve commentary will continue to shape investor expectations.
Dubai is still one of the most popular gold buying destinations due to its competitive pricing, quality of craftsmanship, and range of jewellery. A large part of the people shopping in the emirate are tourists, especially during holiday seasons and festivals.
Financial professionals tell investors that they must keep an eye on global events before making big investment decisions. Gold has historically been a good hedge against inflation and geopolitical risk, but price moves may be substantial in times of market volatility.
Gold prices will continue to be influenced by geopolitical news and central bank policy signals, analysts say. If tensions in the Middle East persist or economic uncertainty increases, demand for gold could remain high, keeping Dubai’s gold prices elevated in the coming weeks.
