Gold Prices Skyrocket in Dubai Markets

Gold Price Surge in Dubai: Reaching Four-Month High

Global demand for gold is on the rise again, and one of the most striking indicators of this trend is the price increase on Dubai’s markets: the week began with a nearly three-dirham increase in gold prices, reaching the highest level in the last four months. Investors are now focusing even more on precious metals, particularly due to the increasingly likely U.S. interest rate cuts and rising geopolitical risks.

Dubai Gold Market Situation

According to Monday morning data from the Dubai Jewellery Group, the price of 24-carat gold rose to Dh418.75 per gram, a significant jump from the weekend's Dh415.5. The historical high reached earlier this year, Dh420, is now just a hair's breadth away. Other types of gold with different purities have shown similarly strong growth:

22K: Dh387.75, 21K: Dh371.75, 18K: Dh318.75

This trend indicates that both local and international demand is strengthening, particularly in the investment gold purchase sector.

Global Factors Driving Gold

Similar trends are prevalent in the global gold market. The spot gold price hovers around $3,477.08 per ounce, showing an increase of 0.84%. The previous peak of $3,500 per ounce is now within arm's reach. This rise is not merely a result of speculation – significant macroeconomic and geopolitical factors are also at play.

According to the chief market analyst at FxPro, the upper limit of the trading range is currently at $3,430, and the price is heading back in that direction. The main driving forces:

US central bank's indications of interest rate cuts

Increased pressure from the White House on the Fed

Heightening geopolitical tensions

Trade disputes, especially between the USA and India

Washington recently imposed a 50% tariff against India, which not only could strain relations between the two countries but also contribute to accelerating the so-called dedollarization process. Part of this involves central banks increasingly opting for gold as a stable basis for their currency reserves.

Record: Gold Outpacing US Treasuries

We have reached a historic turning point: for the first time since 1996, central banks' gold reserves have exceeded U.S. Treasury holdings in the structure of international reserves. Gold currently accounts for approximately 25%, while U.S. Treasury securities are only around 20%.

This trend points toward diversification: central banks do not wish to base their reserves solely on dollar-denominated assets. Instead, reserves based on physical gold, which offer stability, are playing an increasingly important role.

Why is Gold Strengthening to This Extent?

Gold serves as a “safe haven” in the investment world when the economic environment becomes uncertain, investors tend to turn towards assets that provide security, and gold always comes to the fore at such times. However, it is not just the usual inflationary or geopolitical fears driving the price now.

The flattening of the U.S. yield curve – especially in the case of 2 and 10-year treasury bills – indicates that the market is pricing in a stagflationary future. Stagflation, where inflation is high but economic growth stagnates, has historically favored gold.

What to Expect in the Coming Months?

If the Federal Reserve indeed cuts interest rates later this year, it could give an even greater boost to gold prices. Dedollarization efforts, geopolitical tensions (Middle East, Russia-Ukraine, USA-China), and trade wars continue to pose significant risks, all drawing investors' attention to gold.

From Dubai's perspective, this is particularly interesting: the city remains one of the world's most important gold trading centers, thanks to its tax-free structure, proximity to global shipping routes, and its population's traditional attraction to precious metals.

Consumer Behavior and Investor Trends

Demand is increasing among local residents and tourists alike, especially for 22K and 24K products. The volume of investment purchases – particularly bars and coins – has also risen in recent months, as many seek safe value-holding assets amid global uncertainties.

Meanwhile, the jewelry industry is also benefiting from this price movement, as gold remains part of the traditional gifting culture in the UAE, regardless of its price.

Summary

The steep rise in gold prices in Dubai is not just a simple market fluctuation, but part of a deeper global realignment. Changes in the behavior of central banks, concerns surrounding the US economy, and geopolitical conflicts all contribute to bringing gold back into the spotlight. The trends observed on Dubai markets are therefore not just local phenomena, but reflections of the global economic pulse.

(The article is based on data from the Dubai Jewellery Group.)