Shoppers at Malabar Gold & Diamonds outlet in Deira gold souq. Image Credit: Virendra Saklani/Gulf News

Dubai: Were you hoping to buy gold jewellery soon but find prices way out of your reach? UAE experts say such buyer-averse conditions are likely to persist with gold prices widely expected to persistently mark a new record high in the weeks to come. So, hold off on buying gold for now!

Gold has risen more than 15 per cent in the past three months and is now the best performing investment since the start of 2024. While that’s good news for investors looking to sell at a profit, buyers are fretting over prices not being low enough to stock up gold jewellery or coins.

“Gold has been making a string of record highs in April, putting gains of 14 per cent this year till time higher than the 13 per cent gains that gold put in all of 2023,” said Georgina Effel, a Dubai-based precious metals retail analyst.

In the UAE, the 24-karat gold price rate was at Dh284.25 per gram on Monday, higher than last night’s closing rate of Dh283.75. Similarly, 22-karat, 21-karat and 18-karat also inched higher at Dh263.25, Dh254.75, and Dh218.50 per gram, respectively. Check the latest rates here.

Postpone gold shopping for now?

“As an investment asset, gold has been getting a lot of support from safety buying on the back of higher inflation in multiple economies worldwide, looming expectation of global interest rate cuts and rising geopolitical tensions,” she added.

In other words, macro-level uncertainties in the market are making gold the currency or commodity of choice to hold. Historical data often indicate how such volatilities often lead to investors moving their investments into gold, same as what has been observed over the past weeks.

“When interest rates are no longer hiked and cuts start, which is the expected trend, returns will start to drop on cash deposits. In this case, investors can tend to turn towards gold, which increases the demand and prices for the yellow metal, but this shift will take months to actualise.”

“This is a reversal as opposed to recent times when the stock market turned highly volatile during times of global economic uncertainty, which dented the prospects of market returns. In these scenarios, investors turn to gold as a safe asset. But when volatility eases, gold price drops.”

Gold to rise fast, and then drop fast

However, Effel added there is scope for pull back of gold's recent gains before the second quarter ends in June, even as safety buying raises prices in 2024. Analysts have subsequently raised end of 2024 target to well above the current global cost per ounce of $2,335 (Dh8,575).

“Top banks and brokerages suggest that gold prices can surge to $2,500 (Dh9,181) or even $3,000 (Dh11,017) with the current momentum and that liquidation, when it comes, could be sharp but a buying opportunity nonetheless!” said Zubair Shakeel, an Abu Dhabi-based investment manager.

“Gold prices will further be pushed higher partly on higher crude oil prices, which in turn contributes to inflation worldwide. Crude is up 18 per cent.”

On the back of uncertain performance in risky assets, Shakeel reiterated that it is still strongly advised to remain invested in gold for further 10 to 15 per cent holdings if prices stay range bound and increase it to 20 per cent if costs spike further.

Interest rate hike effect on gold to stay

“The market has been pricing in multiple rate cuts worldwide this year, which will soon force gold costs to be lower than it is now. Nevertheless, gold price remains supported by safe-haven demand amid any uptick in concern over global economic uncertainty,” added Shakeel.

Meanwhile, Effel advised short-term investors who are looking to sell and book profits that they should wait until the end of 2024, preferably till gold prices are hovering above $2,300 (Dh8,575) per ounce or Dh280 to Dh290 per gram in the UAE.

“If people have bought gold for investment purpose, they may book at least partial profit so that they may add to their gold holdings at lower rate. For UAE gold shoppers, all they would want to see is whether the UAE gold rate has a chance to slip towards Dh200 a gram for 22 karat,” added Effel.

So how long do gold buyers wait for the next big drop? Based on recent trends, there's no guarantee that the price will drop anytime soon as gold's value is only seen increasing in the weeks to come. However, prices should correct itself before the end of 2024 – just as fast it has risen recently.

Bottom line?

So, do you postpone your gold shopping for later in the year? Given that prices are expected to drop before the end of the year, it would be cost effective to put off any buying plans until then. If you are an investor looking to sell your gold before it drops again, it would be prudent to wait a few weeks.

“With prices increasing as they have been, this may be a rare opportunity for investors to earn some income from an asset historically better known as a portfolio diversification and an inflation protector,” added Shakeel.