Dubai gold prices ease again, but can buyers expect a bigger drop?

Dubai: Can gold buyers expect prices to go down the same way they did during the previous escalation? (Check latest UAE gold prices here, alongside prices in Saudi Arabia, Oman, Qatar, Bahrain, Kuwait, and India.)

That is the question UAE shoppers and investors are asking after Dubai gold prices slipped again on Thursday morning, even as renewed US strikes against Iran pushed oil higher and revived concerns over inflation, interest rates and the next move in bullion.

At 10:07 am, 24K gold stood at Dh489.75 per gram in Dubai, down from Dh490 on Wednesday, while 22K gold eased to Dh453.50 from Dh453.75. The move was small, but it kept prices below the levels seen earlier this month and brought 24K gold back to exactly where it started July.

Dubai gold prices began the month at Dh489.75 per gram for 24K, climbed steadily to Dh503 on July 4 and July 5, then started easing as global bullion lost momentum. Prices slipped to Dh499 on July 6, Dh493.50 on July 7, Dh490 on July 8 and Dh489.75 on Thursday morning.

For buyers, that means the early July rise has now been fully erased, although prices remain above the late June low of Dh485.25 recorded on June 30.

Gold held a decline in global trade as markets weighed a second day of US strikes against Iran, higher energy prices and the risk that inflation could stay elevated for longer.

Bullion traded near $4,070 an ounce after falling for three straight days. The latest attacks came after US President Donald Trump said he thought a ceasefire was “over”, while Tehran threatened a large-scale retaliatory operation against US bases in the Middle East.

Oil prices climbed after the escalation, with Washington also revoking a waiver that had allowed Iran to sell crude globally. The concern, for gold traders, is that higher energy prices could feed back into inflation and make it harder for the US Federal Reserve to relax monetary policy.

Minutes of the Fed’s June meeting released on Wednesday showed that a few policymakers saw a case for an increase, even though they supported the decision to keep rates unchanged. Higher borrowing costs usually weigh on gold because the metal does not pay interest.

Gulf News had earlier reported that gold’s crisis response has been far more restrained than many buyers expected, despite the metal’s long-standing reputation as a safe haven during global turmoil.

During the previous phase of Middle East escalation, Dubai retail prices swung heavily, with 24K gold moving from the Dh590 range in mid-February to above Dh636 by the end of that month, before easing and stabilising later. Analysts at the time said the rally was being capped by a stronger dollar, rising yields, inflation concerns and profit-taking after a long bull run.

The same pattern is visible again now, although the price action is more cautious. Safe-haven demand has not disappeared, but it is competing with a stronger dollar, rate expectations and uncertainty over whether the latest escalation will hit oil supply and inflation in a lasting way.

Dilin Wu, Research Strategist at Pepperstone, said gold is now caught between opposing forces.

“Gold is caught in a genuine tug of war right now — the upside is clearly capped, but the downside is contained too,” Wu said.

On the bearish side, Wu said the renewed US-Iran escalation has sent oil higher, reigniting inflation fears and pushing rate hike expectations in a more hawkish direction. That brings the rate constraint on gold back into play, while safe-haven flows continue to favour the dollar over bullion.

“But the bull case hasn't disappeared either. The June NFP print was a serious challenge to the "resilient labour market" narrative, and it's forced the Fed to at least reconsider the pace of tightening. Meanwhile, central bank buying — particularly from emerging markets — continues to provide a structural floor under prices over the medium term,” Wu said.

The next move for gold may depend on whether the escalation disrupts energy flows enough to change the inflation outlook.

Wu said two variables will determine whether gold can find its footing from here. The first is Hormuz transit flows, because any renewed disruption could push oil higher and increase inflation pressure. The second is the July 14 US inflation print and Kevin Warsh’s Congressional testimony.

Markets are expecting headline inflation to ease slightly from 4.2% to 3.9%. A print below 4% would give the Fed more room to stay on hold, which could help gold recover. Sticky inflation would have the opposite effect by pushing yields higher, strengthening the dollar and putting pressure back on bullion.

“My read: $4,000 to $4,200 is a highly uncertain trading range right now. Rather than taking a strong directional view, traders are likely waiting for more data confirmation before committing. CPI on the 14th is the moment of truth,” Wu said.

The current 24K price of Dh489.75 is well below the June 16 level of Dh522.25 and the June 18 level of Dh509.25, but it is still above the late June low. That keeps buyers in a wait-and-watch position, especially those looking to purchase jewellery or small bullion bars during price corrections.

A deeper fall would likely need a firmer dollar, higher yields or a clear signal that gold’s safe-haven demand is fading. A rebound would need either a cooler US inflation reading, a weaker dollar, renewed central bank demand or a fresh escalation that markets treat as a larger macro shock.

As of today, Dubai gold prices have given back their early July gains, but traders are still waiting for the data point that decides whether the next move is toward $4,200 or back toward $4,000.

- With inputs from Bloomberg.