Gold prices in UAE: Is Dh400 per gram the new normal?
If you live in the UAE and are thinking of investing or saving through gold for the long term, now might be the time to do so.
Gold is likely to stay above the Dh400 per gram mark in the medium to long term, according to analysts and industry observers. This is already a sea change in market structure (as/where?)
This is the first time in April, 24-karat gold crossed the Dh400-per-gram mark in Dubai. The increase was underpinned by broader global uncertainties, and political and economic events – both at home with Donald Trump and overseas – as well as by falling interest rates and the strong demand of central banks (when many were out selling at the same time).
Gold prices were at Dh400 for 24-carat Wednesday evening. while 22-carat gold cost Dh370. 75. Globally, spot gold stayed at $3,306 an ounce (+0.13 per cent).
“Volatility should stay for a while as the new sentiments would depend on the new headlines emerging from various trade negotiations ongoing,” said Vijay Valecha, Chief Investment Officer, Century Financial. Even a positive breakthrough deal or new tariffs will most likely cause violent price action.
While short-term movements are common, Valecha said gold prices should stay over Dh400 a gram in the long term. Trump’s ever-changing tariff strategies have caused a great deal of uncertainty when it comes to international trade — and as is always the case during uncertain times, demand for safe-haven assets such as gold is on the rise.
Just last week, he threatened a 25 per cent tariff on every iPhone he built outside the United States and a 50 per cent tariff on EU products — which were both temporarily pushed back amid ongoing trade negotiations.
Valecha said that even if new trade deals are in place -- and tariffs are lowered -- gold will continue to appeal because of larger economic issues. He sees gold soaring to $3,700 by the end of 2023 and possibly $4,000 by the middle of 2026, compared to $3,335 an ounce now.
These are America’s growing trade deficit, the steep rise in US debt-to-GDP ratio from 35 per cent in 2007 to possibly closer to 100 per cent by 2025, and the fiscal consequences of Trump’s tax cuts, which had all instigated a global move to safety, he stated. These elements fortify gold as a diverging and stabilising asset for portfolios.
On the other hand, Valecha said, sizeable deals related to trades tend to ease gold prices down for a while, however, the large macroeconomic fundamentals are still in favour of sustaining the gold rally.
These sentiments were echoed by Aditya Singh, Head — International Jewellery Business, Titan Company. While gold prices today may feel high, they follow historical trends; prices typically go up during economic uncertainty, he said.
Retail buyers need not react in panic but track some of the global factors like interest rates, inflation, geo-political tensions and reserves of central banks and their action in global markets, he said. Strong returns are typically the result of small, frequent investments. Customers should ideally think of gold as a combination of emotional — wedding, (other) milestones — and financial value.
Ramesh Kalyanaraman, Executive Director, Kalyan Jewellers, added that jewellery is a long-term asset and this bond is everlasting. He added: "Demand in markets such as the UAE, that has cultural meaning will guarantee that gold will always have a place even if there are natural fluctuations in price.
Comments