Gold prices in Dubai experienced a significant drop on Friday, with a decrease of Dh5 per gram observed during the early trading hours. According to data from the Dubai Jewellery Group, the price of 24K gold stood at Dh293.50 per gram on Friday morning, down from Dh298.50 per gram at Thursday's market close. The prices of other gold variants also declined; 22K, 21K, and 18K were trading at Dh271.75, Dh263.25, and Dh225.50 per gram, respectively.
Earlier this week, gold prices in Dubai surpassed Dh300 per gram, driven by expectations of a US Federal Reserve interest rate cut in September. Globally, spot gold traded at $2,415.05 per ounce, a decrease of 1.1 percent due to profit-taking. Kelvin Wong, a senior market analyst at Oanda, noted that the yellow metal is currently facing some profit-taking following its recent surge. He also highlighted a positive medium-term outlook for gold due to political uncertainties and anticipated rate cuts.
Analysts predict a recovery in gold prices in the upcoming weeks and months, influenced by expectations of a Fed rate cut and global uncertainties. Antonio Ernesto Di Giacomo, a market analyst at xs.com, mentioned that gold prices hit historic highs on July 17, fueled by optimism surrounding a potential Federal Reserve rate cut in September. The price reached $2,483.00 per ounce, exceeding market expectations and reflecting increasing investor confidence in future monetary policies.
This substantial increase is primarily attributed to the anticipation of interest rate cuts, a crucial factor affecting financial markets. The expectation of rate cuts has been reinforced by weak Consumer Price Index (CPI) inflation data and signals from the Federal Reserve indicating a moderate trend. Investors have been closely monitoring economic indicators suggesting a cooling of the US economy. In this context, the possibility of an interest rate cut has been viewed as essential to stimulate economic growth and control inflation, factors that have bolstered demand for gold as a safe haven.
According to the CME Fedwatch, there is a greater than 90 percent probability of a 25-basis-point cut in September. This high probability has significantly fueled the rise in gold prices. Investors anticipate that a lower interest rate environment will boost demand for gold and other precious metals, as the opportunity cost of investing in these assets decreases. Confidence in an imminent rate cut has prompted investors to turn to gold for refuge, driving its price to record levels.
With a high likelihood of a rate cut in September, gold demand is expected to remain robust in the near term, further solidifying its status as a safe asset during times of economic uncertainty, according to Antonio.
