Gold prices in Dubai extended their downward trend on Wednesday morning, shedding up to Dh0.75 per gram, according to data from the Dubai Jewellery Group. The price of 24K gold fell to Dh315.50 per gram, down from Dh316.25 per gram at the close of trading on Tuesday. Overall, gold prices have dropped by Dh8 per gram so far this week, reflecting a notable decline that has impacted both consumers and investors.
Other gold variants also experienced price declines. The 22K gold price dipped to Dh292.25 per gram, while 21K and 18K gold dropped to Dh283 and Dh242.50 per gram, respectively. These reductions signal a broader trend of price adjustments in response to global economic factors and shifting market dynamics.
Global Trends and Influencing Factors
On the global market, gold was trading at $2,005.56 per ounce, reflecting a 0.21 per cent decrease. The dip in prices aligns with increased caution among investors due to fluctuating economic conditions and central bank policies.
Samer Hasn, Senior Market Analyst at XS.com, attributed the ongoing decline in gold prices to persistent concerns over higher-for-longer interest rates and related policy directions from the White House, which could stoke inflation and spur business growth. These factors have been mirrored in the continued rise of Treasury yields, presenting a challenging environment for precious metals.
“Despite recent communications by the Federal Reserve, there was no significant boost in market sentiment to support expectations of rate cuts next year. We are currently seeing a gradual decline in the likelihood of the Fed reducing rates in January,” Hasn explained. He noted that, according to the CME FedWatch Tool, the probability of a rate cut in January has significantly decreased, with only an 11 per cent chance of further cuts in March, compared to over 60 per cent a month ago.
The diminishing probability of rate cuts has driven two-year Treasury yields—which are especially responsive to shifts in short-term interest rates—to rise more rapidly than 10-year yields. As a result, two-year Treasury yields have reached 4.33 per cent, their highest level since July. This surge in yields underscores investor sentiment that short-term borrowing costs will remain elevated, impacting the appeal of non-yielding assets like gold.
Potential Upside for Gold
Hasn pointed out that while global trends have pressured gold prices downward, the uncertainty surrounding future economic growth in China, combined with potential geopolitical risks, could bolster gold’s appeal as a safe-haven asset. The complex dynamics involving U.S.-China trade relations, with the possibility of former President Trump returning to office and reigniting trade tensions, add another layer of unpredictability.
“The potential return of former President Trump and his propensity for trade conflicts may enhance gold’s status as a preferred safe haven in China,” Hasn said. He added that ongoing declines in Chinese house prices and challenges faced by the country’s stock market in maintaining gains amid doubts over the effectiveness of economic support measures could further reinforce this trend. Asia continues to account for a substantial portion of global demand for gold bars and coins, which underscores the region’s significant influence on the market.Gold’s role as a protective asset may become more pronounced if global economic uncertainties persist, providing a counterbalance to current downward pressures.
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