According to data from the World Gold Council, demand for gold jewelry is likely to remain under pressure throughout the second half of this year. Meanwhile, geopolitical uncertainty, inflation concerns, and limited alternative investment options will continue to support demand for bullion and coins.
The report on gold demand trends for the second quarter of 2026 noted that the volume of demand for jewelry reached its lowest quarterly figure since the pandemic—278 tonnes. This was due to high gold prices and general inflationary pressure, which restricted purchasing power. Nevertheless, spending on gold jewelry grew by 14% year-on-year, reaching $40 billion.
In Middle Eastern countries, jewelry demand remained weak in the second quarter due to high prices affecting affordability. Despite regional geopolitical turmoil, some growth was ensured by prices that were lower than previous peaks. Saudi Arabia showed itself to be one of the strongest participants in the region, demonstrating an 8% year-on-year decrease. In the UAE, the market recorded its fourteenth consecutive quarterly year-on-year decline, becoming one of the few markets where a drop in demand in US dollars was observed.
Market activity in the UAE was pressured by a decrease in tourist flow, as the country's economy is heavily dependent on tourists in the jewelry sector, and the conflict between the US and Iran negatively impacted activity. The market received some support due to lower prices and demand from Indian expatriates, which is likely to increase in the remainder of the year due to increased Indian import duties, giving the region a price advantage.
While jewelry demand remained weak, investment demand in the region proved more resilient. The World Gold Council noted that geopolitical instability continues to stimulate the purchase of safe-haven assets, and the correction in gold prices in the second half of the quarter contributed to the search for favorable deals. Investments in bullion and coins in the UAE increased by 30% year-on-year in the second quarter. This growth was driven by both demand for safe assets and higher Indian import duties, making the purchase of gold in the UAE relatively more attractive.
Across the Middle East, investment demand remained steady despite some slowdown compared to the exceptionally high figures at the beginning of the year. Globally, total gold demand, including over-the-counter (OTC) investments, remained unchanged year-on-year at 1269 tonnes in the second quarter. Thus, demand for the first half totaled 2522 tonnes, which is 2% more than the previous year. However, the value of this demand reached a record $380 billion due to rising prices.
Analysts believe that gold will not reach historical highs in the second half of 2026. This is because higher interest rates in the US, increased treasury bond yields, and a strengthening dollar are putting pressure on the precious metal, despite persistent geopolitical tensions that support demand for safe-haven assets.
Under current market conditions, gold is expected to trade within a limited price corridor until the end of the year. Any significant rise will depend on changes in monetary policy expectations or signs of economic slowdown, according to analysts.
Vijay Valecha, Director of Investments at Century Financial, noted that stronger-than-expected economic growth in the US and persistent inflation have led investors to anticipate a tighter Federal Reserve policy, which negatively affects the price of gold. He predicts that the precious metal will remain predominantly within current levels until the end of the year.
The CIO explained that if any major catalyst appears, such as a reversal in monetary policy expectations or an economic slowdown, gold could experience an upward trend reversal. Until then, fluctuation within the set range is expected.
Valecha also highlighted the inverse relationship between gold and the US dollar: a strengthening greenback usually lowers the price of bullion. Furthermore, higher treasury yields reduce the attractiveness of non-yielding assets like gold, increasing the opportunity cost of holding this metal.
Although geopolitical tensions continue to support demand for gold, some experts believe that the current conflict in the region has created a different dynamic compared to previous crises. Ole Hansen, Head of Commodity Strategy at Saxo Bank, stated that rising oil prices have increased inflation expectations, which has strengthened the US dollar and kept bond yields high, offsetting much of gold's traditional appeal as a safe haven.
According to Hansen, gold will trade in a wide range of $3900 to $4200 per ounce until inflation and interest rate issues become clearer. He added that attracting a new wave of investment demand will likely require a sustained breakthrough above the $4500 mark, as many investors are still awaiting greater clarity regarding the Middle East, inflation, and interest rate prospects.
Hansen also warned that until financing cost forecasts stabilize or decrease, non-yielding assets like gold are likely to face periodic headwinds.
Despite short-term difficulties, analysts remain optimistic about the long-term prospects for gold. Avad Issavi, Regional Press Secretary and Market Analyst at iFOREX, pointed out that continued central bank purchases, high government debt, and the need for portfolio diversification continue to support the precious metal.
However, he noted that achieving new record highs will likely require a combination of monetary policy easing, stable inflation, and persistent geopolitical uncertainty, rather than a single factor. Valecha also mentioned that in the UAE, higher prices are changing consumer behavior: consumers are increasingly opting for smaller weight jewelry or purchasing bullion and coins as a long-term investment, while investors continue to view gold as an important tool for portfolio diversification.
Gold prices in the United Arab Emirates dropped by 5 dirhams per gram on Tuesday morning. This decline continued the recent market weakness as expectations of interest rate hikes in the US and persistent inflation concerns outweighed demand for safe-haven assets driven by regional tensions.
The price of 24-karat gold traded at 488 dirhams per gram, which is below the 483 dirhams recorded at the close of Monday, representing a loss of 5 dirhams. According to Dubai Jewellery Group data, other precious metal options also showed a decline: 22K, 21K, 18K, and 14K fell to 495.25, 474.75, 407, and 317.5 dirhams per gram, respectively.
Globally, the spot gold price rose by 0.93 percent, reaching $4050 per ounce according to UAE time at 9:10 AM. Silver also increased by 1.84 percent, trading at $57.87, after falling by 6.5 percent last week. Analysts note that dollar stability provided some support to bullion, but the overall situation remains complex due to rising oil prices, which intensify inflation fears.
Vijay Valecha, Director of Investments at Century Financial, stated that recent events create a significant hurdle for non-yielding assets like gold. He noted that the rise in Brent crude oil prices above $90 per barrel heightens concerns that higher energy costs could sustain high inflation. Furthermore, according to the CME Fedwatch tool, markets are now pricing in an 80 percent probability of an FOMC rate hike by December, up from 73 percent last week.
Valecha added that geopolitical escalation forces investors to weigh risks regarding safe-haven assets against the backdrop of expected US interest rate hikes. While geopolitical uncertainty continues to support some flight-to-safety demand, the inflationary impact of the conflict and expectations of high long-term rates are currently limiting gold's growth potential. From a technical standpoint, the short-term outlook remains bearish. On the four-hour chart, gold is trading within a downtrending channel and below key moving averages. Immediate resistance is seen at the 4040–4045 dollar level at the upper boundary of the channel, while support is around $3970, a level recently tested multiple times. A sustained breakout above the channel could support a recovery, whereas a move below $3970 could lead to further declines towards $3920.
