After an unexpected shift, the Saudi Arabian gold market turned bullish, with retail demand reaching new peaks, offering the precious metal excellent demand support from an unsuspecting sector. This new surge in gold demand brought the cost of 24-karat gold per gram to an astonishing 231.98 riyals, marking a record high for the local market. Both local investors and analysts are shocked by the sudden spike in prices as the Saudi Arabian economy continues to develop in unforeseen ways.
The surge in gold prices took place on September 16, according to data from the Saudi Press Agency. The new price levels have created much higher benchmarks than any levels set previously before.
The cost of 24-karat gold reached 231.98 riyals per gram, 22-karat came to 212.65 riyals per gram, 21-karat rose to 202.98 riyals per gram, and 18-karat hit 173.99 riyals per gram. Of course, this means the market for larger quantities of gold went up as well. A 24-karat one-gram Guinea coin reached 2,227.01 riyals, 22-karat one-gram Guinea coins hit 2,041.43 riyals, and 21-karat eight-gram Guinea coins came to 1,948.63 riyals.
Traders interested in purchasing in bulk will face the same price spike as well. Following the recent bullion rise, one kilogram of gold reached 233,604.13 riyals.
So, why is gold suddenly surging in Saudi Arabia?
This question is a hot topic among analysts. Numerous complex factors are contributing to the current rise in bullion demand in Saudi Arabia, including tightening geopolitical tensions, shifts occurring in the global economy, and changes in investor preferences.
To start, Saudi Arabia is part of OPEC+, the Organization of the Petroleum Exporting Countries, an intergovernmental organization involving all of the top oil-producing nations in the world. Saudi Arabia, as part of OPEC+, has enacted significant oil production cuts and price increases in recent months. By cooperating with Russia and Ukraine, Saudi Arabia has entangled itself in deep geopolitical tensions inside of the OPEC group while also creating conflicts with nations it exports to by imposing oil cuts, hence favoring Russia.
“We just watch supply demand. If there is a shortage of supply, our role in OPEC+ is to fill the shortage. If there is oversupply, our role is to measure that for stability of the market,” Crown Prince Mohammed explained in an interview when discussing the OPEC+ supply cuts and how they benefit Russia.
This brings us to the next factor being shifts occurring in the global economy. OPEC+ nations and BRICS leaders (Brazil, Russia, India, China, and South Africa) continue hopping on the de-dollarization trend to devalue the U.S. dollar and give rise to other currencies. This effort, combined with what’s happening in the oil cuts, led to a shift in how we trade oil.
The top oil-producing nations in the world have spent decades pricing the commodity in U.S. dollars and accepting the currency for trade, though this is no longer the case. OPEC+ nations, including Saudi Arabia, are shifting away from the U.S. dollar to no longer accept it in oil trades. As this shift commences, more nations must continue stockpiling gold as a necessary reserve if the U.S. dollar won’t cut it anymore.
The final factor contributing to the spike in Saudi Arabia’s gold prices is a change in investor preferences. As the nation’s local economy teeters through uncertain times, investors seek a safe, secure, inflation-proof asset they can depend on. Gold performs well during periods of economic uncertainty, so as the greater world experiences turmoil, it only makes sense that bullion demand continues rising.
Between Saudi Arabia’s complex ties with Russia, oil policies, and rising investor demand, the increase in local gold prices only makes sense. This phenomenon isn’t only occurring in Saudi Arabia, either.
Pakistan continues to raise its gold imports, with levels increasing by 44.13% in recent months compared to this time last year. Pakistanis are turning to gold because of extreme inflation rates and tightening access to the U.S. dollar.
“The uncertainty surrounding the rupee and the unavailability of dollars is causing people to turn to gold, which has now become the only other acceptable currency after the dollar,” Nasim Beg, the director at Arif Habib Corporation, explained.
At the same time, China recently lifted its restrictions on gold imports after the renminbi suffered a 16-year low against the U.S. dollar. As more nations continue turning toward the precious metal, gold enjoys much-needed support on a global scale amid rising inflation rates. As always, investors should consult their financial advisors before making any portfolio decisions.