Gold Markets in Dubai Under Pressure

Gold Prices in Dubai: Market Pressure and Geopolitical Tensions

The gold market has once again gained attention in Dubai due to the precious metal's price slightly correcting downward, but beginning to rise slightly again on Wednesday. The price of 22-carat gold exceeded 450 dirhams per gram, while 24-carat gold closed at 491 dirhams. This rebound is partly of a technical nature and partly due to investors trying to interpret the effects of global economic and political developments.

Why Has Demand for Gold Weakened?

Gold typically plays a role in investment portfolios when economic or geopolitical uncertainty increases. However, in recent times, several factors have emerged that have alleviated this need. The most significant impact has been from changes in expectations related to the Federal Reserve's interest rate policy. Previously, many expected an interest rate cut in December, but this likelihood has now diminished.

Market pricing currently gives only a 43 percent chance of a 25 basis point rate cut in December. This is compared to a previous 62 percent probability just a week earlier, indicating that the Fed will likely approach interest rate decisions cautiously. The reduced likelihood of a rate cut is generally unfavorable for gold, as non-yielding assets like gold become less attractive compared to higher-yield investments.

Market Focus on Labor Data

In the coming days, investor attention will be on U.S. economic indicators, particularly the report on September's non-farm jobs data. This report was originally supposed to be released earlier but was postponed to Thursday. The report will be crucial in terms of how it portrays the labor market and how it might influence the Fed's interest rate policy.

If employment data is strong, it may affirm the central bank's view that urgent easing is not necessary. This could further reduce demand for gold. Conversely, if weaker numbers are reported, the market might reassess the possibility of a December rate cut, which could support gold's price.

Trade Policy and Inflationary Pressure

Another significant factor affecting gold is the global trade climate. The U.S. government recently relaxed previously imposed tariff measures, particularly in the food products sector. The purpose of the related presidential order is to ease inflationary pressures and reduce living costs for the population.

This "softer" trade approach has resulted in a positive market sentiment, temporarily reducing the demand for gold as a safe haven. Such measures typically indicate that policymakers are trying to stabilize prices and calm market nerves, which in itself can reduce the demand for safe-haven assets like gold.

Geopolitical Risks Remain Present

Although trade tensions have eased, this does not mean that demand for gold has entirely disappeared. Serious geopolitical risks are present in several parts of the world. Tensions, particularly in Eastern Europe and the Middle East, could easily escalate and bring uncertainty to the markets.

These events may once again increase gold's role in the eyes of investors as a safe haven. Gold prices often rise when war or political risks intensify, as gold is traditionally seen as a store of value during crises.

Dubai's Role in the Global Gold Market

Dubai has long been a hub for global gold trade, thanks to its tax-free environment, excellent logistic infrastructure, and buyer trust. According to Dubai Jewellery Group data, the price of 24-carat gold has risen from 489.75 dirhams to 491 dirhams. Other variants have seen the 22K gold priced at 454.25 dirhams, 21K at 436 dirhams, and 18K at 373.75 dirhams per gram.

Such price changes clearly reflect how quickly Dubai's gold market responds to international events, whether they are economic data, interest rate decisions, or geopolitical developments.

What Can Be Expected in the Near Future?

The gold market remains vulnerable to global macroeconomic developments. If economic data paints a weaker picture, or if new geopolitical tensions arise, gold prices may gain strength again. However, if the Fed does not cut rates and trade relations continue to improve, gold may easily retreat from its current levels.

Investors should continuously monitor gold movements, especially in the Dubai market, which often foreshadows global trends. Prices react sensitively to any news affecting global political stability or the future of monetary policy.

Dubai, as a gold trading hub, remains a key player in global markets and offers excellent opportunities for both investors and buyers even in a volatile economic environment.

(Based on data from Dubai Jewellery Group.)