The World Bank is forecasting an economic slowdown in the Middle East and North Africa (MENA) region before the year ends. In times of economic uncertainties like this, people tend to turn to gold, which is considered a safe-haven asset. But here’s a caveat: While gold retains value over time, its price can be volatile in the short term.
UAE gold price trends
In the United Arab Emirates (UAE), gold prices have experienced noticeable fluctuations. The country is home to one of the most significant gold markets in the region — the Dubai Gold Souk.
In particular, the price per gram of 24-carat gold, the purest form of gold, started at $64.53 in August. Then, it dipped to $60.93 by the end of September. As of the latest data on October 6, it has remained relatively stable at $60.11.
The trends for 22-carat and 18-carat gold have followed similar patterns. They recorded fluctuations during August and September but there remained a general downward trajectory. For 22-carat gold, the initial price of $59.77 ultimately decreased to $56.43. Meanwhile, 18-carat gold, which began at $49.56, fell to $46.83 by the end of last month. On October 6, 22-carat gold saw a gradual slip to $55.68. On the other hand, 18-carat gold’s value stood at $46.22.
Global demand
On a global scale, gold continues to be viewed as a hedge against inflation. According to the Gold Demand Trends report from the World Gold Council, gold experienced robust growth in the first half (H1) of the year. Increased central bank purchases, a strong performance in investment markets, and sustained demand for jewelry contributed to this growth.
In the second quarter (Q2), gold demand decreased by 2 percent year-on-year (YoY) to 921 metric tons. This excludes over-the-counter (OTC) transactions. Taking total demand into account, including OTC transactions, it will be a 7 percent YoY increase. This indicates a healthy global gold market.
Meanwhile, during H1 of 2023, central banks acquired a record 387 metric tons. Moreover, quarterly demand aligns with a positive long-term trend.
In terms of gold investment, demand for gold bars and coins increased by 6 percent YoY to 277 metric tons in Q2. It reached a total of 582 metric tons in H1. This growth was driven by key markets such as the United States and Türkiye.
Despite higher gold prices, jewelry consumption also remained strong. It witnessed a 3 percent YoY increase in Q2, subsequently hitting 951 metric tons by the end of H1. A rebound in demand from China and strong consumption in Türkiye during the second quarter proved to be a major support.
Total gold supply saw a 7 percent YoY increase in Q2, reaching 1,255 metric tons. Meanwhile, mine production was estimated to have set a record for the first half of the year at 1,781 metric tons.
Read: Central banks boost gold reserves amid economic uncertainties
Still a safe haven
Louise Street, senior markets analyst at the World Gold Council, shared that “record central bank demand has dominated the gold market over the last year.”
“Despite a slower pace in Q2, this trend underscores gold’s importance as a safe haven asset amid ongoing geopolitical tensions and challenging economic conditions around the world,” she further elaborated.
For the rest of 2023, she noted that “an economic contraction could bring additional upside for gold, further reinforcing its safe-haven asset status.”
According to her, demand from investors and central banks will continue to grow. This potential increase in demand may also help offset any weaknesses in jewelry and technology demand resulting from a reduction in consumer spending.
Looking ahead to 2024, researchers predict more modest price increases. However, market data also suggests that gold prices may start to fall as there’s already an 8 percent increase this 2023.
Zubair Shakeel, a UAE-based investment manager, reiterated that gold can still be a good investment in the long run, taking into account the potential interest rate cuts later in the year, which could benefit gold. Safe-haven demand also continues to support gold prices amid concerns about global economic uncertainty.
“When interest rates are no longer hiked, which is seen to be the trend in the months ahead, returns will start to drop on cash deposits. In this case, investors can tend to turn toward gold, which increases the demand and prices for the yellow metal, but this shift will take months to actualize,” Shakeel further opined.
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