Gold price rally is expected to continue on the back of geopolitical tension in the Middle East and interest rate cut expectations by the US Federal Reserve, reaching Dh365 per gram in Dubai in the coming months, analysts said.
Therefore, analysts suggest that it is high time to invest in the precious metal as prices could go up by about 25 per cent in the months ahead.
The precious metal, which is traditionally favoured as a safe-haven asset, prices jumped Dh6 per gram in the past 24 hours as of Thursday morning due to geopolitical tension and the assassination of the Hamas leader.
On Wednesday, gold gained $40 in one session as the Fed stance started to become more dovish along with the escalating tensions in the Middle East after the recent Israeli strike on Beirut and the assassination of the Hamas leader.
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On Thursday afternoon, the 24K variant of the yellow metal was trading at Dh296 per gram while 22K, 21K and 18K were selling for Dh274.0, Dh265.25 and Dh227.25 per gram, respectively. Spot gold was trading at $2,434.68 an ounce at 12.45 pm UAE time.
Gold has shown a remarkable 18.55 per cent year-to-date (YTD) increase. Globally and in the UAE, the price of gold hit an all-time high in mid-July at $2,482, translating to about Dh300 per gram in the UAE. Following this peak, the precious metal has consolidated its gains by trading sideways over the past two weeks, awaiting what could potentially be the last Federal Open Market Committee (FOMC) meeting before the Fed possibly starts the highly anticipated rate cuts in September.
Vijay Valecha, chief investment officer at Century Financial, said the current regional conflict could expand and this will only support gold price further.
“As the Fed hints at potential rate cuts by September, lower interest rates reduce the opportunity cost of holding non-yielding assets like gold, putting pressure on the dollar and making gold more attractive to investors holding other currencies. Forecasts suggest a promising trajectory for gold, with a potential target range of $2,700-$3,000, translating to Dh330-Dh365 in the upcoming months,” Valecha told Khaleej Times.
He said local factors in the UAE could also prop up gold prices such as the onset of the tourist season draws shoppers worldwide to Dubai. “Additionally, Diwali and the commencement of the wedding season in the country could further boost gold demand, benefiting from seasonal trends and supporting further gold prices.”
Ole Hansen, head of commodities strategy at Saxo Bank, said that based on the current trends and factors supporting gold prices, it is possible that gold prices could cross Dh300 per gram again in the coming sessions as the yellow metal has been resilient due to strong demand from family offices, rich individuals, and central banks, as well as the prospect of the US rate-cutting cycle beginning earlier than expected.
“Additionally, geopolitical risks, strong retail demand in China, and continued central bank purchases provide solid support for gold prices. It’s important to note that crossing Dh300 per gram, which is around $2,540 per ounce, would take prices above our (Saxo Bank’s) year-end target of $2,500. For this to be achieved, the US rate-cutting cycle needs to get into gear, and the dollar needs to stay relatively weak. These conditions would create an environment conducive to pushing gold prices higher,” said Hansen.
He added that several key factors will influence and lift prices and demand of gold in the coming weeks such as expectations around the Fed’s rate cuts, ongoing geopolitical tensions, including those related to Russia/Ukraine and the Middle East, continued purchases by central banks, strong retail demand in China and a revival in Western ETF investment flows.