Retail prices decline despite escalating tensions in the Strait of Hormuz, as a firming interest rate outlook continues to weigh on market sentiment.
DUBAI: Gold prices in Dubai slipped slightly on Monday morning, mirroring a broader global decline, as investor sentiment was driven more by shifting interest rate expectations than by ongoing geopolitical tensions.
At 8:25 am, 24-karat gold was priced at Dh577.50 per gram, down from Dh582.25 on Sunday. The 22-karat variant also slipped to Dh534.75 from Dh539, creating a slight buying opportunity after last week’s higher price levels.
The decline mirrors a broader trend in international markets, where bullion eased below the $4,800 level to around $4,775 during early Asian trading, even as tensions around the Strait of Hormuz continued to intensify.
Rates take centre stage
The move highlights a market recalibration, with expectations around monetary policy now playing a more dominant role in price direction than geopolitical developments.
Rania Gule, Senior Market Analyst at XS.com MENA, said the recent move reflects shifting investor priorities. She noted that “this decline does not reflect a fundamental weakness in gold’s status as a safe haven, but rather reveals a more complex shift in market dynamics.”
She added that expectations of persistently high US interest rates have increased the opportunity cost of holding gold, since the metal does not yield interest. This has kept prices under pressure even during periods of elevated geopolitical risk.
Gule explained that investors are now reacting more strongly to interest rate signals than to conflict-driven uncertainty, emphasising that “the key factor now is not the level of risk itself, but the opportunity cost of holding gold.”
Geopolitics priced in
Tensions in the Strait of Hormuz intensified over the weekend, with vessels advised to avoid the area and renewed uncertainty surrounding ceasefire efforts between the US and Iran. Oil and gas prices rose on supply concerns, while a stronger US dollar added further pressure on bullion.
However, gold’s muted reaction suggests markets are increasingly treating such risks as ongoing rather than sudden shocks. Rania Gule noted that geopolitical developments are now often viewed as “chronic,” meaning they are already partially reflected in prices and therefore less likely to trigger sharp rallies.
This shift has made gold’s price behaviour less straightforward, with investors adopting a more selective approach to safe-haven positioning instead of automatically rotating into bullion during periods of crisis.
Retail data in focus
Market attention is now shifting to upcoming US retail sales data for March, which is expected to show a 1.3% increase compared to 0.6% in February. The release is likely to play a key role in shaping near-term market direction.
Stronger data would reinforce expectations of prolonged monetary tightening, supporting the US dollar and placing additional pressure on gold. Conversely, a weaker reading could ease that pressure and help revive bullish momentum in bullion, particularly if geopolitical risks remain elevated.
Rania Gule said the market is currently undergoing a broader repricing phase, where assets are being evaluated more closely against real return expectations. In this environment, gold is struggling to keep pace with rising yields, resulting in near-term weakness.
Temporary correction or entry point
Despite the recent pullback, the medium-term outlook remains more constructive. Gule suggested that the current dip could represent an opportunity for longer-term investors, especially if Middle East tensions persist or signs of economic slowdown begin to emerge.
She added that gold is likely to remain volatile in the near term, with a slight downward bias as long as interest rates stay elevated. Over time, however, the balance between yields and risk could shift again, potentially allowing bullion to regain upward momentum.
