Gold Prices Drop in Dubai: What's Behind It?

Gold Prices Drop in Dubai: What's Behind It?

The demand and price for gold traditionally react sensitively to global economic, geopolitical, and central bank developments. In Dubai, a hub for international gold trading, prices have been moving downward this week – with 24-karat gold becoming more than 9 dirhams cheaper per gram, closing at 404.25 dirhams on Friday.

Recent Price Movements in Dubai

On Friday, the following prices were recorded on Dubai's gold market:

24K gold: 404.25 dirhams/gram

22K gold: 374.25 dirhams/gram

21K gold: 359.00 dirhams/gram

18K gold: 307.50 dirhams/gram

At the same time, the international spot gold price decreased by 0.63%, moving to $3,352.38 per ounce.

Why Are Gold Prices Dropping?

The decline is primarily attributed to expectations related to the United States Federal Reserve. Investors are increasingly less expecting further rate cuts, which reduces gold's attractiveness as a non-interest-bearing asset. When interest rates are low, gold typically becomes a more attractive investment, but the market is now pricing in the end of the rate-hike cycle and the absence of any rate cuts.

Moreover, increasing geopolitical tensions in the Middle East – particularly the Israeli-Iranian conflict – have not driven gold prices as expected. Although prices briefly surged above $3,400, the market quickly pulled them back once fears of direct military escalation eased.

Safe Haven Status: Still Effective?

Geopolitical uncertainties typically boost demand for gold as investors seek a safe haven. However, this effect has proven to be moderate this time. According to experts, the current price level supports the theory that some degree of flight-to-safety demand still exists, but it does not dominate the market.

Long-term Prospects

While current price movements are downward, many believe that the long-term prospects for gold remain stable. Numerous central banks and reserve funds around the world continue to strive to diversify their foreign reserves away from the US dollar – a trend that could continue to generate demand for gold.

Dubai's gold market remains a key player in global trade, where international price fluctuations, central bank decisions, and investor sentiment collectively shape daily prices. The current decline offers an ideal opportunity for those looking to invest in the precious metal for the long term.

(The article is based on statements from gold investors.)