Why UAE investors are buying more gold — even studios, 1-bedrooms in Dubai

Dubai: Investors in the UAE are starting to add more gold to their portfolios as concerns over whether stocks, Bitcoin and other assets might be getting overpriced.

Gold is once again the ‘de-risk’ asset investors want to add and hold on to as they try and de-risk their portfolios to any sudden drop in stocks, especially after the US markets kept going higher on AI expectations.

As of now, gold is trading at near $3,350 an ounce, which means not much has changed in recent days. (The Dubai gold price is at Dh372.25, and it has been at around these levels since August 14.)

At the same time, some of these UAE investors are booking profits on the gains they made on stocks and selling crypto to pick up property in Dubai and elsewhere in the UAE.

New launches have been heavily promoting studios priced around the Dh500,000 mark and not just the top-of-the range options.

“There is quite a bit of such diverted investments that we are seeing now, especially for studios and 1-bedroom apartments,” said an estate agent. “Many of these deals are also being settled in crypto, especially after Bitcoin went past $110,000.

“These investors feel they have a good chance of renting out these smaller sized properties, generating yields of around 5%-7%.”

That’s modest compared to what one can expect from sticking to US stocks or crypto. But the mood is to lower the risk profile too.  

“US stocks are still in record-breaking territory - but the valuation gap is at historic extremes,” said a senior analyst at the trading platform IG.

“The Nasdaq now stands at 105% of US GDP, nearly double from 2022 and above its dotcom peak levels. This makes tech stocks more expensive relative to the economy than at any time in history.

“Even as rate cut bets fuel the rally, (stocks of) large-cap tech names like Nvidia, Alphabet and Microsoft are showing signs of fatigue, prompting investors to question how long this pace can last.” 

Gold prices are down just over $50 on an ounce basis in the last 30 days.

But on a 6-month basis, it’s up over $400. With prices holding steady at $3,500 levels for now, investors feel there is a chance for them to get in and still make some gains down the line.

According to trading trends seen on IG, 70% of trades are in ‘buy’ positions on gold.

“With US tech stock valuations stretched, geopolitical risks building and expectations of US monetary easing still in play, we expect gold to be supported as hedge against a potential pullback from stocks.

“Also, there’s a surge in demand for gold from China, where gold ETF Exchange Traded Fund) inflows have hit a record $6 billion. Net inflows have more than doubled in the past three months.”

So, if the Chinese are betting bigger on gold, it does look like other investors see there’s value in doing some of their own buying.

At the least, it cuts down on the risks. That’s exactly what UAE investors seem to be doing.