Gold prices in Dubai rose above the 500 dirham mark for the first time in over a month amid the possibility of resuming shipping through the Strait of Hormuz.
Gold prices in Dubai rose above the 500 dirham mark for the first time in over a month amid the possibility of resuming shipping through the Strait of Hormuz.
The 24-karat option increased by 21.75 dirhams in one day, trading at 514 dirhams per gram on Thursday morning, which is higher than 492.25 dirhams at the market opening on Wednesday. Other varieties of the yellow metal, including 22K, 21K, 18K, and 14K, also showed growth, reaching prices of 475.75, 456, 391, and 305 dirhams, respectively.
The price of gold on the spot market was $4260.43 per ounce, showing a rise of 0.37 percent. Silver remained stable, trading at $62.08, corresponding to a rise of 0.1 percent.
Analysts note that market sentiment was supported by reports that the US, Iran, and Oman are close to reaching an interim agreement on normalizing sea transport through the Strait of Hormuz. The prospects of this agreement also contributed to reducing inflation concerns and lowered expectations of further tightening of Federal Reserve policy.
Vijay Valecha, Investment Director at Century Financial, stated that the potential easing of geopolitical tensions prompted investors to adjust forecasts regarding additional rate hikes. Markets are now fully pricing in only one Fed rate hike by the end of the year, compared to two expected just a week ago. He added that lower interest rate expectations are usually favorable to non-yielding assets such as gold.
The rise in the price of the yellow metal is also due to lower expectations of Federal Reserve rate hikes; the market is forecasting only one more rate increase by the end of the year. Furthermore, demand is supported by renewed investments in Chinese gold ETFs.
Valecha explained that additional support for the precious metal comes from China, where gold-backed funds have shown a 14-day inflow streak, the longest since March. The resumed institutional demand indicates improved investor sentiment in the world's largest precious metals market and helped keep prices above the psychologically important level of $4000 per ounce.
Gold prices in Dubai decreased by 4 dirhams per gram on Tuesday morning. This occurred because hopes for a ceasefire between the US and Iran weakened demand for safe-haven assets. Meanwhile, investors continued to monitor forecasts regarding interest rates in the US.
The price of 24-karat gold in Dubai was 487 dirhams per gram, which is lower than the 491 dirham recorded at the close of markets on Monday. Other purity options—22K, 21K, 18K, and 14K—traded at prices of 451, 432.25, 370.50, and 289 dirhams, respectively.
Globally, spot gold reserves traded at $4041 per ounce, showing a decline of 0.82 percent. Silver lost about 2.17 percent, reaching the mark of $57.13 per ounce.
Analysts note that besides the cessation of two weeks of US military actions against Iran, investors are concerned about inflation. Vijay Valecha, Investment Director at Century Financial, stated that despite short-term optimism, the metal remains in a broader downward trend. He explained this by saying that inflation concerns persist, increasing the probability of rate hikes.
Valecha added that market participants will closely watch the Federal Open Market Committee (FOMC) meeting, as the escalation of the situation in the Middle East has led to increased energy costs. According to CME FedWatch, the probability of maintaining current rates stands at 70 percent after Trump announced the ceasefire. Nevertheless, the analyst noted that markets still assess the probability of a rate hike by year-end at 88 percent, indicating continued pressure on the metal until inflation concerns subside.
From a technical perspective, over the past month, the metal has mainly fluctuated in the range of $3945 to $4160. A decisive breakout and close above the $4160 level would signal a strengthening bullish momentum. Otherwise, the price may test the recent support at $4022, followed by $3945. There is also respect for the long-term downtrend line connecting highs at $5420, $4774, and $4130.
