Gold Rally Gains Momentum
The gold rally gained momentum in Dubai this week as prices rose hourly, reaching less than Dh10 or nearly Dh500 per gram.
Current Gold Prices
The 24K variant of the precious metal rose by Dh9 to Dh493.25 per gram on Monday evening, while the 22K variant rose by Dh8.5 to Dh456.75 per gram. Among the other variants, 21K and 18K rose to Dh438 and Dh375.5 per gram respectively.
Upward Trend
If this upward trend continues, prices in Dubai will cross Dh500 per gram for the first time ever. Spot gold was close to US$4,100 an ounce on Monday evening and was trading at US$4,097.5 an ounce at 6:45pm UAE time, reflecting US-China trade tensions and expectations of interest rate cuts by the US Federal Reserve.
Forecast and Analysis
Amid trade and geopolitical tensions around the world, Bank of America on Monday raised its forecast for gold to $5,000 an ounce and silver to $65 an ounce. The White House’s unorthodox policy framework should continue to support gold given fiscal deficits, rising debt, intentions to reduce current account deficit/capital inflows, and efforts to cut interest rates with inflation hovering around three percent.
Market Trends
Gold prices have reached historic highs, breaking through $4,000. That’s a significant increase from levels near $2,620 where it began trading this year, representing a gain of just over 54 percent year-to-date. While President Donald Trump’s recent comments about reinstating aggressive tariffs on Chinese imports are undeniable, geopolitical concerns have heightened and safe-haven inflows have boosted the ongoing gold rally, driven by deeper macroeconomic changes.
Key Catalysts
A key catalyst is the growing expectation of monetary easing by the Federal Reserve in 2025. While inflation remains slightly higher but there are signs of economic slowdown, particularly given recent jobs data, markets are increasingly pricing in a shift toward rate cuts. The potential for lower interest rates does not make high-yielding assets like gold more attractive. Added to this is uncertainty over the risk of a prolonged government shutdown in the U.S., which continues. This undermines confidence in financial stability and further increases investor demand for safe havens.
Global Trend
The global trend toward de-dollarization is accelerating. Central banks, particularly in emerging markets, have increased their gold reserves to reduce dependence on the US dollar. We have seen positive net purchases by central banks in 27 of the last 28 months. This sustained demand from the official sector has provided a strong foundation for gold to rise.
Concerns and Outlook
Furthermore, concerns about currency devaluation are resurfacing. With high government debt and persistent fiscal deficits in major economies, investors are increasingly turning to gold as a hedge against long-term inflation and the decline in the value of fiat currencies. All of the above factors have shaped a broader outlook that supports further upside for gold.
