Dubai gold prices crossed the AED 500 per gram mark for the first time in more than a month. The change comes post the chaotic situation around the Strait of Hormuz and global interest rate outlook.
The 24K gold price rose sharply by AED 21.75 in a single day, reaching AED 514 per gram on August 6 morning. It was trading at AED 492.25 at the market opening on August 5. Other gold categories also recorded gains. The 22K variant was priced at AED 475.75 per gram, while 21K gold traded at AED 456. The prices of 18K and 14K gold stood at AED 391 and AED 305 per gram, respectively.
Global markets also saw gold prices moving higher. The spot gold price was trading at $4,260.43 per ounce, up 0.37%. Silver prices remained steady at $62.08 per ounce, rising 0.1%. Analysts said the movement reflected changing expectations around interest rates, geopolitical developments and investor demand for precious metals.
Market analysts stated that gold prices received support from reports that the US, Iran and Oman were moving closer to an interim agreement to restore normal shipping activity through the Strait of Hormuz.
Vijay Valecha, CIO of Century Financial, said, “The potential easing of geopolitical tensions has prompted investors to scale back expectations for additional rate hikes, with markets now fully pricing in just one Fed rate increase by year-end, compared with two expected only a week ago. Lower interest-rate expectations are generally supportive of non-yielding assets such as gold.”
He said markets are now expecting only one Federal Reserve rate increase by the end of the year, compared with expectations of two hikes a week earlier. Lower rate expectations generally support gold, as the metal does not provide regular income like interest-bearing assets.
The rise in gold prices has also been linked to stronger investment demand from China. Gold-backed exchange-traded funds (ETFs) in the country have recorded a 14-day run of inflows, marking the longest streak since March.
Valecha explained, “Additional support for bullion continues to come from China, where gold-backed ETFs recorded a 14-day streak of inflows, the longest since March. The renewed institutional demand suggests improving investor sentiment in the world's largest bullion market and has helped keep prices above the psychologically important $4,000/oz level.”
Gold often attracts investors during periods of uncertainty and when expectations around interest rates shift. The latest movement in Dubai prices reflects the combined impact of global economic signals, geopolitical developments and demand from major markets.
Also Read: Dubai Gold Prices Fall to AED 491.75 After Touching July High Above AED 500