Gold prices trade higher at the start of the week

UAE gold market

As the new week kicks off, gold prices in the UAE have witnessed a rise, reflecting the sentiments of investors who anticipate potential rate cuts by the US Federal Reserve later in the year. This optimism has propelled the 24K variant of gold to trade at Dh279.5 per gram on Monday morning, up from last week's closing price of Dh278.75 per gram. This increase signifies a positive trend in the market, especially amidst expectations of forthcoming adjustments in the Federal Reserve's monetary policy.

The rise in gold prices extends beyond the 24K variant, with other variants also experiencing gains. The 22K, 21K, and 18K variants were trading at Dh258.75, Dh250.5, and Dh214.75 per gram, respectively, indicating a broad uptick in gold values across different purities.

The global gold market also echoes this trend, as spot gold was observed trading higher at $2,311.22 per ounce at 9:28 am UAE time. This surge, amounting to a 0.76 per cent increase, is attributed to expectations of Federal Reserve rate cuts and escalating tensions in the Middle East. Such geopolitical factors often drive investors towards safe-haven assets like gold, consequently influencing its market value.

The recent decision by the US Federal Reserve to maintain its key monetary policy rate at a 22-year high further reinforces the anticipation of potential rate cuts in the near future. Despite this decision, which marks the sixth consecutive instance of maintaining status quo, there persists a prevailing expectation of at least one rate cut by the year's end. Such projections, derived from the Federal Open Market Committee's indications during its recent policy meeting, contribute to the current bullish outlook on gold prices.

However, it's worth noting that gold demand has faced some challenges in the recent past, particularly in the first quarter of this year. Record-high prices, driven by substantial purchases from central banks and geopolitical tensions worldwide, resulted in a decline in demand for gold and precious metal jewelry. Data from the World Gold Council reveals that gold demand in the UAE fell by 10 per cent year-on-year in the first quarter of 2024, marking the lowest demand observed in the past nine months.

Specifically, jewelry demand experienced a significant decline of 10 per cent year-on-year during January-March 2024, amounting to 8.8 tonnes. Similarly, demand for bars and coins witnessed a similar downturn of 10 per cent, totaling 2.0 tonnes in the UAE. These figures underscore the impact of fluctuating prices and geopolitical uncertainties on consumer behavior in the gold market.

In conclusion, while gold prices in the UAE have surged at the beginning of the week, driven by expectations of Federal Reserve rate cuts and geopolitical tensions, challenges persist in the form of subdued demand stemming from record-high prices and global uncertainties. As investors navigate these dynamics, the gold market remains subject to the interplay of economic indicators and geopolitical developments, shaping its trajectory in the coming days.