UAE Gold Prices on an Upward Trend: Analyzing Potential Future Movements

Gold prices in the United Arab Emirates continue to increase as the Israel-Palestine war worsens. While the U.S. dollar and bond yields may be strengthening, bullion has yet to hesitate as investors flock toward the safe-haven asset to protect their finances from economic turmoil.

Near the end of October, 24-karat gold increased to Dh241.0, according to data from Dubai Jewellery Group. This increase on October 26 reflected half a dirham rise per gram from the prior trading day. 22-karat, 21-karat, and 18-karat gold all showed similar performance patterns trading at Dh223.0, Dh216.0, and Dh185.0 on October 26, respectively.

At the same time, spot gold increased to $1,988.38 per ounce as tensions worsened in the Middle East, but bullion stood strong, proving its safe-haven status to investors. By October 30, gold futures touched $2,005.60 per ounce.

According to Daniel McCarthy, a strategist at DailyFX, spot gold pricing has been defying gravity in recent weeks as it continues to rise despite the recent U.S. dollar and yield strength.

As of early November, gold pricing in the United Arab Emirates has reached Dh7325.60 per ounce, up from Dh7285.80 per ounce from the day prior. One year ago, UAE gold pricing sat at Dh6526.20 per ounce, representing a 12.2% year-on-year increase, or a 0.55% rise from the last trading day.

As gold continues to outperform asset classes in the UAE, the question on many investors’ minds is whether or not this will continue. Looking back on previous forecasts, most analysts expected this peak to occur right around the time that it did.

“Although gold is forecasted to continue to outperform most other investments in 2023, analysts are not expecting to see a significant push higher above the record highs until the second half of the year. For now, gold price predictions emerge to consolidation before targeting new all-time highs,” Georgina Effel, a Dubai-based precious metals analyst, weighed in a couple of months back.

“While there is scope for some pullback of gold’s recent gains, expect safe-haven buying to raise prices. Analysts have widely subsequently lowered end of 2023 target to $1,900 (Dh6,978) per ounce from $1,942.40 (Dh7,134.48) currently,” Effel continued in the interview back in August.

Clearly, gold has surpassed analyst expectations as it’s already sitting at Dh7325.60 per ounce, well above the higher end of the end-of-year target.

Numerous analysts predict that gold will not rise as much in 2024 as it did in 2023 in the UAE, though multiple signs indicate that this may not be the case. As interest-rate-hiking cycles around the globe settle while Middle East tensions only heighten, gold could continue enjoying even stronger performance rates moving into next year.

“From a buyer’s perspective, the outlook for this precious metal looks promising, primarily due to the easing of inflationary pressures, which may result in the end of monetary tightening. From an investor’s point of view, not so much,”  Zubair Shakeel, a UAE-based investment manager, explained.

“When interest rates are no longer hiked, which is seen to be the trend in the months ahead, returns will start to drop on cash deposits. In this case, investors can tend to turn toward gold, which increases the demand and prices for the yellow metal, but this shift will take months to actualise,” Shakeel continued.

Shakeel advises investors to hold stakes in gold for the long term, maintaining at least 10% to 15% of holdings in the precious metal if prices remain around the $1,940 to $1,970 (Dh7,125 to Dh7,235) range. If prices spike further, Shakeel advises increasing holdings to 20%, though investors must remember to consult their financial advisors for investment advice or specific portfolio support.

“The market has been pricing in multiple rate cuts worldwide later this year, which could be beneficial for gold. Additionally, gold price remains supported by safe-haven demand amid any uptick in concern over global economic uncertainty,” Shakeel explained.

As we enter 2024, the main item on investors’ minds is central bank monetary policies. The U.S. Federal Reserve has paused rates two months in a row now, and most expect another pause in December. According to CME’s FedWatch Tool, the odds of a U.S. rate pause in December is 90.2%.

Following the same data, the first chance of a rate cut comes in March at 18.6%. If this pans out, we may see gold pricing begin to take off during 2024’s second quarter as monetary policies across the globe loosen. Moving forward, traders can continue assessing the incoming data to predict how central banks may respond.

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