Dubai gold price rises nearly Dh4 – shoppers worry about Dh380 plus

Gold prices react instantly to US Fed comments about Sept. rate cut

Dubai: The Dubai gold price shot up nearly Dh4 overnight to Dh376.25 a gram as global markets and assets reacted to the possibility that the US will re-initiate interest rate cuts from mid-September.

From next week onwards, this could mean more increases ahead for gold as markets reset.

For shoppers planning buys in September, this will not be good news.  

For the better part of this week, the local gold rate was at the Dh372.25 mark, which in itself was remarkable because prices have tended to move sharply since April. But then things changed yesterday evening after US Federal Reserve chief Jerome Powell hinted that a September interest rate cut was now a possibility.

When US rate cuts happen, it could trigger weakness for the dollar while gold is seen as an alternative investment option. (Based on how gold prices have performed in the last 5 years, just about everyone knows that gold is good to go as the ‘best’ choice.)

“Next week will show whether there will be another surge towards Dh380 or over levels for Dubai gold rate,” said a jeweller. “From mid-September, the tourists and business travellers will return, and there could also be demand from weddings.

“Anything over Dh380 will be a major blow for jewellery demand.”

Right through the first 10 days of August, the local gold price was ranging between Dh377-Dh379. Gold retailers were not too worked up about prices at the time because a sizable number of their resident shoppers were on vacations and tourist buying was limited.

Next week will thus provide some price trends. Some hope that yesterday’s late gold surge was an ‘over-reaction’ and things could settle down from the new week at Dh373-Dh375. But this is being said more in hope than any real expectation.

Because this is the reality right now – in the global markets, gold prices shot up over $30 to $3,372 an ounce. This will be the level at which the markets start next week’s trade.

If gold jewellery demand doesn’t rise from the start of the key buying season from September, UAE gold trade is potentially looking at the worst year ever. Even if they manage to sell more gold bars and coins, that’s not going to compensate for lower or lost jewellery sales.

Hopes of a gold price drop dashed – again

A week ago, the mood was absolutely different. The US sponsored peace talks over Ukraine looked like it would make some progress – and gold prices did react by lowering to $3,320 levels.

At the time, gold retailers in the UAE were talking up the chances of local prices retreating to even around Dh360-Dh365 a gram.

But now, perceptions have undergone a 180-degree turn. The real concern among shoppers and retailers is what would happen if gold heads back to above Dh380. Worse, once that happens, will it continue to stick to those rates?

For the record, the highest price ever for a gram of 22K in Dubai remains Dh383.75, back in mid-June.