Dubai: During the lead-up to Eid Al Etihad, UAE experts are eyeing an increase in demand for gold jewellery, just like any other major holiday in the Gulf region, more so as prices are expected to remain low as investors move toward riskier assets like stocks in the coming days.
“Globally, gold prices have eased from the weekly highs but holds at $2,650 (Dh9,700) per ounce on Friday, which is more or less the price level the yellow metal will likely persist at over the coming days following last month’s spike up to new highs,” opined April LaVine, a Dubai-based precious metals retail analyst.
"Gold prices have been pressured more so because interest rates have started to drop worldwide. However, any dip in gold price is always a good opportunity for investors and buyers as overall buying sentiment for both gold and silver is optimistic.”
LaVine, along with Georgina Effel, an Abu Dhabi-based gold retail analyst, suggested that buyers should maintain ‘buy on dips’ strategy as long as the price of gold is around $2,650 (Dh9,700) per ounce in the international market, which translates to roughly Dh298 per gram for 22 Karat gold in the UAE.
Backdrop on the mend
“With global economic conditions on the mend in the near term, gold prices will remain subdued for now,” said Effel, while adding that any ‘dip’ in prices will continue being widely perceived as good news for those shopping for gold jewellery.
Domestic gold and silver prices started slightly weaker on November 29, tracking overseas prices. While UAE gold rate for 24 Karat gold was Dh322 per gram, 22 Karat hovered at Dh298, 21 Karat at Dh288, and 18 Karat at Dh248. Click here to track the live price of gold.
“The reason why prices are not expected to spike ahead of the upcoming long weekend is because buyers were seen rushing back in to take advantage of the weakness during the previous trading sessions when gold markets initially fell from record highs,” added Effel.
“However, if prices break above the $2,700 (Dh9,900) level or well above the Dh300 per gram mark for the highly sought after 22 Karat, even though it currently looks highly unlikely that it will, we would see a much bigger move.”
Stay low till 2024-end?
When asked how prices are expected to look at the end of the year, LaVine further noted that any year-end projections would boil down to changes in central bank policies, particularly in the US (via the Federal Reserve), and the US dollar, as they often play a major role in determining gold prices.
“As interest rates are expected to slip further than it is now only by next year, gold will likely become more attractive in price for investors and less interesting or cheap for buyers, meaning gold could benefit as an alternative investment if buyers buy now,” she added.
“As gold is typically inversely correlated with the US dollar, meaning if the dollar stays strong as it is now, gold becomes cheaper for holders of other currencies. Similarly, if oil prices rise significantly, this can also influence gold prices, especially in the Middle East, where both commodities are often linked.
“Also, keep in mind that most of the market-moving stocks are getting pushed higher alongside the US dollar, indicating that investor appetite for risk is growing worldwide. This will further keep prices in check. So with moves subdued, gold is not looking to turn the tide and change the trend soon,” wrote LaVine.
Bottom line?
If there is a balance between seasonal demand and stable global economic conditions, gold may remain relatively stable or even cheap leading up to Eid Al Etihad. However, any major shifts in global economic trends, such as inflation, interest rates, or geopolitical events, could change the outlook. It's worth keeping an eye on these factors in the weeks leading up to the holiday.
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