Gold dips sharply, UAE shoppers advance purchases amid price window

Dubai: Gold’s recent slide has caught many off guard, particularly amid elevated geopolitical risks. Instead of rallying, prices have moved lower, with global macro forces taking control of the near-term direction.

Chris Weston, Head of Research at Pepperstone, said the current setup is difficult to project over any fixed horizon, largely because the situation driving markets is fluid.

“This is a great question, but also an incredibly challenging one to answer,” he said, pointing to the Strait of Hormuz as the key variable shaping outcomes. A prolonged disruption, he added, appears unlikely, with pressure building quickly toward either diplomacy or escalation.

That uncertainty is feeding directly into how gold is trading.

Oil and rates take the lead

Gold is currently behaving more like a rate-sensitive asset than a traditional haven. Rising energy prices have pushed inflation expectations higher, which in turn has driven bond yields up and strengthened the US dollar.

“In the near term, gold is trading more like an anti-bond,” Weston said, explaining that higher real yields are reasserting their usual inverse relationship with bullion.

If oil prices continue to climb, the pressure on gold could persist. Higher inflation expectations would likely keep yields elevated and support the dollar, creating a difficult backdrop for prices to recover.

“If the current situation were to persist for a period of time, one would expect energy prices to continue pushing higher. In that environment, gold would likely come under renewed pressure and move lower.”

That link between oil and gold has become central, with crude now acting as the primary driver of short-term moves.

What could turn prices higher

A shift in oil prices could quickly change the direction. Weston said any signs of easing tensions or improved flow through Hormuz would likely push energy prices lower and reset rate expectations.

“That combination would be supportive for gold,” he said, adding that lower oil prices remain the clearest path to a sustained rebound.

Markets are already watching for signs of diplomacy gaining traction, though the outcome remains uncertain. In the meantime, elevated inflation expectations remain a drag.

Liquidity is overriding the safe-haven trade

Ole Hansen, Head of Commodity Strategy at Saxo Bank, said the recent correction is being driven more by positioning and liquidity than by any breakdown in gold’s long-term fundamentals.

“At this stage, I would interpret it mainly as a liquidation-driven correction rather than a definitive trend reversal,” he said.

Gold has returned to its 200-day moving average for the first time in years, signalling a test of long-term support rather than a structural shift lower.

He added that during periods of broad market stress, liquidity can outweigh the safe-haven narrative.

“Gold is still a defensive asset over time, but during periods of broad market stress it is often sold simply because it is liquid.”

That dynamic has played out in recent weeks, with investors trimming positions to raise cash, meet margin calls and reduce exposure.

Buyers return as prices drop

While global investors remain cautious, the pullback has triggered a different response in the UAE, where consumers are stepping in.

Retailers report a clear pickup in demand, particularly from buyers advancing planned purchases.

“Yes, we are seeing customers who had planned purchases for later in the year choosing to bring them forward,” said John Paul Alukkas, CEO of Joyalukkas Jewellery.

He noted that customers are approaching purchases with greater clarity, often arriving with shortlisted designs rather than making impulse decisions.

At the same time, exchange and upgrade activity has picked up alongside fresh buying, reflecting a more active market.

“Customers are using this window to refresh their collections,” he said, adding that both emotional and practical considerations are shaping decisions.

Shamlal Ahamed, Managing Director of International Operations at Malabar Gold & Diamonds, said the correction has lifted sentiment.

“The recent sharp decline in gold prices has had a distinctly positive impact on consumer sentiment, prompting a surge in buying activity.”

He added that demand is coming from both jewellery buyers and investors purchasing coins and bars, with residents leading the trend.

Volatility set to stay high

Short-term direction remains uncertain, with volatility elevated and price swings likely to remain sharp.

Weston pointed to options markets pricing some of the highest volatility levels seen in recent years, suggesting wide trading ranges even without major new developments.

“The most important factor in gold right now is the elevated level of both realised and implied volatility.”

That environment calls for caution, particularly for investors trying to time the market.

A market pulled in two directions

The current phase reflects a market caught between competing forces. On one side, geopolitical risks and long-term fundamentals continue to support gold. On the other hand, higher yields, a stronger dollar, and inflation concerns are capping upside in the near term.

Hansen said the underlying drivers that supported gold over the past two years remain in place, even if they are not leading the market right now.

“The fundamentals have not disappeared, but the near-term hierarchy of drivers has changed.”

Since the war began more than three weeks ago, gold has moved largely in tandem with stocks and in an inverse relationship with crude. Elevated energy prices have raised the risk of inflation, leading investors to bet that the Federal Reserve and other central banks will keep interest rates unchanged, or hike them. That’s a headwind for non-yielding bullion.

The result for consumers is a window of opportunity. Prices remain below recent peaks, demand is picking up, and sentiment is stabilising. The path forward for investors depends less on headlines and more on how oil, rates, and liquidity evolve in the weeks ahead.