Gold prices experienced a slight decline at the opening of markets in Dubai on Thursday, yet they remained at elevated levels due to ongoing geopolitical tensions in the Middle East. By 9am UAE time, 24K gold was trading at Dh321.5 per gram, a decrease of half a dirham per gram from the previous night's closing rate. The other gold variants also started the day lower, with 22K trading at Dh297.75, 21K at Dh288.90, and 18K at Dh247 per gram, respectively. Spot gold fell by 0.15 percent to $2,656.2 per ounce at 9.10am UAE time on Thursday.
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Rania Gule, a senior market analyst at XS.com, noted that amid escalating geopolitical tensions in the Middle East and fluctuating economic data, gold is currently trading around $2,650.40, facing downward pressure that impedes its continued ascent following a recent sharp increase. Gold prices surged by more than 1 percent in response to escalating developments in the Middle East, prompting investors to view it as a safe haven. However, the price quickly retreated, reflecting the enduring strength of the US labour market, which Gule believes limits the likelihood of significant monetary easing by the Federal Reserve. These fluctuations in gold prices underscore a delicate equilibrium between geopolitical concerns and US economic expectations, where any shift in economic data or political events significantly influences prices.
Gule further explained that a substantial portion of this pressure on gold is attributable to the strengthening US dollar, which has continued to build on its gains over the past few days. The potential for an escalation in the Middle Eastern conflict continues to provide a buffer against gold's decline. Political tensions in this historically volatile region play a crucial role in sustaining a certain level of support for gold prices. Despite the downward pressure exerted by the strengthening dollar and robust US labour data, there remains strong support for gold due to geopolitical fears. Gule believes these tensions are a fundamental driver for gold, and any diplomatic or military escalation could trigger new buying, thereby limiting its losses.
Given these conflicting factors, investors are adopting a cautious approach to gold, viewing any price drop as a buying opportunity under the current circumstances, Gule added.
