Too hot to the touch for shoppers? In 4 months, gold has set new all-time highs twice. Can shoppers expect some sort of drop soon? Image Credit: Virendra Saklani/Gulf News

Dubai: Gold price finally broke through to a new record, of $2,159 an ounce, as part of a 3-day surge as investors pile into the safe haven - and shoppers keep their distance for now. The earlier high was the $2,150 gold had hit in December last.

Currently, gold is trading at $2,159 levels, and there are expectations among analysts that prices will soon start to cool off. But what's worrying for shoppers in the UAE and beyond is that new all-time highs have been set in the space of just 3 months.

"Until now, there was a significant gap between gold's peaks - that seems to be disappearing and getting shorter and shorter," said a jewellery retailer in Dubai. "In these four years, you had a peak in July/August 2020, another in March 2022 (after the start of the Russia-Ukraine crisis), and then in December 2023 (on worries about US interest rate cuts). And now the latest one.

"For the previous gold peak, one has to go back to 2010-11 (when it cleared $1,900). Clearly, gold is having those moments far too frequently these days."

Dh 242 a gram

The UAE gold rate for 22K, currently at its highest ever.

The mood among UAE shoppers has turned to sit out this round of high prices, and that's understandable under the circumstances. What will trouble the local jewellery trade is that tourist buying of gold will also ease up, as the 'buying at the peak makes no sense' sentiment takes hold.

Investment purposes

Even then, shifts have started to take place in how UAE consumers are approaching gold. It's apparent that many are going big on gold bars and coins instead of only jewellery when prices tend to escalate. This trend had built up considerably last year.

Gold at $2,500 - and higher?

These days, few are discounting that possibility outright. If the US stock markets turn sour in any way, another burst of investing in a safe haven asset as gold can take off again. 

"It looks highly plausible that gold will continue the upward trend and could scale heights of more than $2,600 an ounce before this year ends," said Vijay Valecha, Chief Investment Officer at Dubai-headquartered Century Financial.

"The pace of growth will definitely depend on the geopolitical scenarios and what's happening with major economies. The trajectory of US interest rates will also be of great importance for the price of the metal. However, it does look like this bull market in gold could be a very big one."

Shoppers and jewellery retailers will have only one thought - how high can this go? And for how long?

Because after the 2011 peak, there was an extended period when gold prices dropped quite significantly. In December of 2015, it's price was barely above $1,000 an ounce.

What shoppers should watch out for?

The Eid phase is typically a high demand one for UAE and Gulf gold buying. Jewellers are already bringing out campaigns to ease shopper concerns about what they should be doing. The 'book now buy later' promotions have started to show up again, where on a down payment, shoppers can lock in prices. And benefit if they drop further on the actual transaction date 30 days from the booking. 

Why's gold on this record run? It's all about inflation
"We have always observed that along with gold moving up in times of trouble, it also has a step-based approach towards economic cycles. Where gold starts on a bull run after accumulated inflation over previous years.

"We have seen such moves have been in 2005, 2007, 2009 and the last in 2019. Gold cycles usually have seen an up move of close to 70% plus above the breakout levels. It is safe to assume that the global inflation has aggregated more than 50% since 2011 major peak of $1,900 an ounce."

- Vijay Valecha of Century Financial

Gold prices could just as easily come off these highs, as happened with Bitcoin after it set an all-time high of $69,000 and over this week before dropping. Bitcoin is currently at $66,000 plus. 

The US Federal Reserve has its meeting next week, and whatever decision is made - cut rates or hold steady - will have its say on the direction of gold prices. Until then, shoppers could be better off waiting...