Dubai 24K Gold Jumps Dh7 as Rising Oil Prices Fuel Inflation Fears and Fed Rate Hike Expectations.
Dubai: Gold prices in Dubai rebounded on Thursday, recovering from a steep decline in the previous session as surging oil and fuel costs heightened inflation concerns and investors assessed the possibility of another interest rate hike by the US Federal Reserve this month.
The price of 24-karat gold in Dubai rose by Dh7 to Dh499.75 per gram, compared with Dh492.75 at Wednesday’s close. Meanwhile, 22K gold climbed to Dh462.75 per gram from Dh456.25.
In international markets, spot gold gained 1.34% to trade at around $4,141.60 an ounce, supported by a weaker US dollar and renewed safe-haven demand as investors sought protection against economic uncertainty.
For gold buyers in the UAE, the latest increase means purchasing 10 grams of 24K gold would now cost approximately Dh4,997.50, excluding making charges and other retail fees.
Rising oil prices intensify inflation concerns
The rebound in gold prices comes as elevated energy costs continue to weigh on global financial markets, raising fresh concerns over inflation and the outlook for US interest rates.
US consumer inflation accelerated in September, driven largely by rising gasoline prices. The increase has fuelled concerns that sustained energy-related inflation could complicate the Federal Reserve’s efforts to bring down borrowing costs.
Gold is traditionally viewed as a hedge against inflation, attracting investors looking to preserve wealth during periods of rising prices. However, its appeal can weaken when persistent inflation prompts central banks to maintain higher interest rates or consider further increases, as gold does not generate interest.
“What we’re seeing here is just the symptoms of a market uncertain about US interest rate policy, and that is resulting in a bit of volatility,” Kyle Rodda, senior financial market analyst at Capital.com, told Reuters.
Rodda identified the area just below $4,000 an ounce as a key level to watch, warning that stronger-than-expected US economic data could reinforce expectations of a more immediate interest rate hike.
Fed rate hike expectations rise
Expectations of another US interest rate hike have strengthened following the latest inflation figures, adding uncertainty to the outlook for gold.
According to the CME FedWatch Tool, markets are now assigning a roughly 32 per cent probability to a rate increase later this month, compared with 22 per cent before the inflation data was released.
Higher interest rates typically weigh on gold because the precious metal offers no interest income, making alternatives such as government bonds and cash deposits more attractive to investors.
San Francisco Federal Reserve President Mary Daly indicated that further interest rate increases would likely be necessary, but suggested there was no immediate pressure to act at the central bank’s October 27-28 policy meeting.
Fed Vice Chair for Supervision Michelle Bowman also signalled a cautious approach, saying policymakers had room to evaluate incoming economic data before deciding on their next move.
Weaker dollar lends support to gold
Gold prices also found support from a softer US dollar on Thursday, after the currency retreated from an 18-month high reached overnight.
A weaker dollar generally makes gold more affordable for investors using other currencies, helping boost demand for the precious metal.
Spot gold advanced 0.7 per cent to $4,134.08 an ounce at 0644 GMT, recovering after Wednesday’s decline to its lowest level since October 7.
Meanwhile, US gold futures for December delivery gained 1.2 per cent to $4,155.50 an ounce.
Christopher Wong, a strategist at Oversea-Chinese Banking Corp, told Bloomberg that gold had also benefited from a reversal in US Treasury yields, which retreated after an earlier increase.
What higher gold prices mean for Dubai shoppers
For consumers in Dubai and across the UAE, the latest rebound has pushed 24K gold prices back towards the psychologically significant Dh500-per-gram level.
At Thursday’s quoted rates:
- 24K gold: Dh499.75 per gram, an increase of Dh7 from Wednesday’s close.
- 22K gold: Dh462.75 per gram, up Dh6.50.
- International gold: Around $4,141.60 an ounce, reflecting a gain of 1.34 per cent.
While these rates provide a benchmark for buyers, the final cost of gold jewellery is typically higher once making charges and other applicable retail costs are included.
Consumers planning to purchase jewellery should therefore compare the total amount quoted by retailers rather than relying solely on the advertised per-gram gold rate.
Investors await fresh US economic data
Attention now turns to upcoming US economic indicators, with Producer Price Index (PPI) and retail sales figures due later on Thursday expected to provide further insight into the Federal Reserve’s next policy move.
Stronger economic activity or persistently elevated inflation could increase expectations of further interest rate hikes, potentially limiting gold’s gains.
However, continued uncertainty surrounding energy prices, geopolitical developments and global financial markets could sustain investor interest in gold as a safe-haven asset.
For Dubai buyers, the combination of shifting US interest rate expectations, dollar movements and inflation concerns suggests that gold prices could remain volatile in the near term.
With inflation concerns supporting safe-haven demand and expectations of higher US interest rates weighing on bullion, gold prices could remain volatile in the coming days.
“We’re coming up to a really critical level for gold, which is just below the $4,000 level,” Rodda said, highlighting a key price threshold that investors will be closely watching.
