Gold prices in Dubai have dropped after a sudden surge in oil prices. The instability comes after the escalating US-Iran tensions reshaped market expectations. Gold prices were trading at Dh545.25 per gram on Tuesday morning, as US-Iran tensions lifted oil prices and stoked inflation fears in the US economy.
Higher crude prices have also raised new concerns about global inflation. Reportedly, the central banks, especially the US Federal Reserve, might keep interest rates elevated for longer.
According to Dubai Jewellery Group data, the 24K gold price was trading at Dh545.25 per gram, down from Dh549.75 per gram at the close of markets on May 25. The spike in oil prices has become the key driver. Supply risks linked to Middle East tensions have kept crude volatile.
Now, investors have started to look towards rigid monetary policies, which affect the price of gold. The precious metal doesn’t provide any interest income on itself. When rates rise, holding bullion becomes less attractive compared to yield-bearing assets.
It has restricted gold prices even under such uncertain times. Even the safe-haven effect could not offset the yield. Dubai’s gold rates closely follow international prices. The recent fall in prices mirrors the global correction in bullion markets.
Local demand remains consistent, but global signals continue to determine the price action. Foreign exchange movements and consumer behavior at retail stores have contributed very little to the trend seen currently. Price direction will depend on three factors:
Movement in oil prices
Developments in US-Iran relations
Signals from central banks on interest rates
Looking ahead, Kelvin Wong, a senior market analyst at Oanda, said, “Even though we have a peace deal that is being done and dusted between the US and Iran, the damage that has been done to Middle East oil production facilities could actually prevent a rapid normalisation of oil flows into the rest of the world from the Middle East.”
Moreover, there is now a split market scenario for gold. Geopolitical tensions and central bank purchases serve as supportive factors while inflation and interest rates pose resistance.
Also read: Dubai Gold Rebounds After Dh21 Plunge, 24K Now Holds at Dh547.25 Per Gram