Why Gold and Silver Prices Plummeted

Gold and Silver Prices Plunge in Dubai: What's Behind It?

The prices of gold and silver have recently seen a spectacular rise, particularly affecting investors looking for a safe haven amidst global economic tensions and geopolitical risks. This trend, however, reversed decisively this week—with significant price drops witnessed both in Dubai and internationally. The price of 24-carat gold per gram fell below 499 dirhams, signifying a loss of over 22 dirhams in a single day. Silver experienced an even larger plunge, dropping by more than 7.4%.

But what prompted this sudden change, and how should investors react? We'll explore the reasons and potential outcomes in detail below.

From Record Highs to Decline: What Happened to Prices?

On Monday, the international price of gold reached an all-time high with a value of $4,381 per ounce. Silver also saw strong growth before dropping to $48.37 on Tuesday evening, falling below $50. This turnaround represented a 5.3% drop for gold and a 7.4% fall for silver.

In the Dubai market, the price of 24-carat gold dropped to 499 dirhams by the end of the day, while 22K, 21K, and 18K gold also significantly decreased in value, falling to 462.25, 443.25, and 379.75 dirhams respectively.

What Caused the Turnaround?

There are several interconnected factors behind the scenes:

1. Strengthening Dollar – The exchange rate of the US dollar rose, which generally negatively affects the prices of gold and silver because these precious metals are denominated in dollars. When the dollar strengthens, metals become more expensive in other currencies, reducing demand.

2. Profit Taking – Following the market's rise in recent weeks, many investors began to realize their profits, automatically exerting selling pressure on prices.

3. Easing Geopolitical Tensions – The rapprochement between U.S. and Chinese leaders and the potential for a trade agreement reduced the risk factors that had driven gold and silver. Demand for a safe haven decreased.

Market Overheating and Correction

More and more experts warned of overheating in the precious metals market due to the rapid and steep rally. Demand was driven not just by geopolitical factors but also by expectations, such as the possibility of the Federal Reserve cutting rates, which usually benefits gold prices.

Now, however, it seems that the market overheated, and some investors cashed out to secure previously gained profits. This kind of readjustment is a natural part of any upward trend, especially when it's not fully justified by fundamentals.

What to Expect in the Future?

While the current correction is significant, long-term prospects may still be supportive. Analysts indicate that for silver, for example, the scarcity of supply and demand from the renewable energy sector continue to provide solid fundamentals. The manufacture of solar panels requires a significant amount of silver, and this sector is expected to grow rapidly in the coming years.

For gold, geopolitical and economic uncertainties can still provide support. Conflicts around the world, inflation fears, or even potential new financial crises may again bring precious metals to the forefront in portfolios.

The Role of Dubai's Gold Market

Dubai has long played a central role in global gold trading, thanks to its duty-free gold imports and advanced jewelry industry. The Gold Souk and gold ATMs have become iconic sights throughout the city, and investment gold is easily accessible for both residents and tourists.

The current price drop could present an opportunity for those who were previously unable or unwilling to enter. With the price of gold falling below 500 dirhams, it may become more attainable for many buyers.

Is It Worth Entering Now?

The decision naturally depends on the individual circumstances of each investor. However, those thinking long-term should consider that precious metals remain important elements of portfolio diversification. Therefore, the current decline does not necessarily pose a threat, rather an opportunity—especially in the Dubai market, where the difference between buying and selling prices (spread) is particularly low, and the infrastructure is reliable.

Summary

The decline in gold and silver prices in Dubai and worldwide stems from a complex, multi-factor movement rather than a single cause. The strengthening of the dollar, easing geopolitical tensions, and investor profit-taking all contributed to the current correction. However, long-term trends—such as industrial demand or economic uncertainty—still favor precious metals. Those planning to invest in gold or silver in Dubai might find more favorable entry opportunities now than a few days ago.

(The article is based on analysis by Capital.com.)