Gold prices in the UAE hit a record high on Monday afternoon, briefly dampening demand for the precious metal jewellery.
The 24K variant of the yellow metal jumped to Dh296.0 per gram on Monday afternoon, up from Dh292.5 at the opening of the markets, but prices settled down to Dh293.0 per gram in the evening. On the other hand, 22K, 21K and 18K were trading at Dh271.25, Dh262.5 and Dh225.0 per gram, respectively.
Gold jewellery shoppers in Dubai usually opt for a wait-and-watch approach when prices hit record peaks. Hoping for the prices to settle down, they hold their purchases temporarily. Importantly, most of the residents bought gold jewellery in the previous few weeks ahead of the Akshaya Tritiya festival on May 10.
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Gold jewellers in Dubai reported strong footfall during the festival, which is considered auspicious for gold jewellery purchases. During this period, many residents and visitors bought gold jewellery to cash in on discounts and sales during this period.
Industry executives say that the drop in gold jewellery is temporary owing to its status as a safe haven and also due to the strong appeal it has among consumers – both residents and visitors. Hence, sales will pick up once the market sees some correction and shoppers will return during festivals and wedding seasons.
Globally, spot gold was trading at $2,422.45 per ounce at 7pm UAE time, after it reached nearly $2,450 per ounce earlier. The yellow metal jumped due to stronger optimism about the interest rate cuts by the US Federal Reserve.
Mohamed Hashad, chief market strategist, Noor Capital, said gold prices surged to a record high in Asian trading on Monday, driven by increased geopolitical tensions in the Middle East, which boosted demand for safe-haven assets. A broader rally across metal markets also contributed to the yellow metal’s rise.
In addition to the situation unfolding about the helicopter crash of Iranian President Ebrahim Raisi, ongoing conflicts in the Middle East have kept the market on edge.
“In Europe, increased military action between Russia and Ukraine has also supported safe-haven demand, as both nations launched strikes against each other over the weekend,” he added.
This week, market participants are also focusing on cues from the Federal Reserve. Recent soft US inflation readings for April have heightened hopes that the central bank might begin trimming rates as early as September. The anticipated rate cuts are expected to further support metal prices, particularly gold, as lower interest rates typically increase the appeal of non-yielding assets.
Marc Pussard, head of the risk at APM Capital, said over the last two years, gold has had two tailwinds that have helped propel its price to all-time highs – global inflation and a flight to safety following the Russian invasion of Ukraine.
“Now add to that the market’s obsession with the timing of the US Federal Reserve’s interest rate cuts. A weakening dollar would make gold cheaper for foreign investors, increasing demand and prices. It wouldn’t see a surprise for gold to break the $2,600 per troy ounce price in the coming months and $2,700 by year’s end,” he said.