Global Gold Weakens, Dubai Gold Prices Fall

Illustration of gold. Photo: Pexels.

JAKARTA - The tension between the United States and Iran has not yet pushed the price of gold to rise. In the global market, gold bars are still stuck near $4,070 per ounce. In Dubai, the price of 24 karat gold actually fell back to 489.75 dirhams per gram on Thursday morning.

Gulf News, quoted Thursday, July 9, reported that the price of 24-karat gold in Dubai fell slightly from 490 dirhams on Wednesday. 22-karat gold also weakened to 453.50 dirhams from the previous 453.75 dirhams.

The decline is small. However, the movement has made 24 karat gold return to its original position in July. At the beginning of the month, the price of 24 karat gold was at 489.75 dirhams per gram, then rose to 503 dirhams on July 4 and 5.

After that, the price fell as global gold weakened. Dubai gold prices moved to 499 dirhams on July 6, 493.50 dirhams on July 7, 490 dirhams on July 8, and back to 489.75 dirhams on Thursday morning.

For buyers, the initial increase in July has now ended. However, prices are still above the lowest point in late June of 485.25 dirhams on June 30.

The market is still cautious. Gold did not jump even though the risk of war had increased again. Market participants are watching the second day of the US attack on Iran, rising energy prices, and the risk of inflation that could last longer.

The latest attack comes after US President Donald Trump said the ceasefire was "over". Tehran also threatened a massive retaliatory operation against US bases in the Middle East.

Oil prices rose after the escalation. Washington also revoked an exemption that previously allowed Iran to sell crude oil globally.

For gold market participants, rising energy prices could again push inflation and make it more difficult for the US Federal Reserve to loosen monetary policy. High interest rates are usually less friendly for gold because the precious metal does not pay interest.

The Fed's June minutes released Wednesday showed some policymakers saw a case for raising rates, though they still backed the decision to hold rates.

Gulf News previously noted that gold's response to the crisis this time was more limited than many buyers expected. In fact, gold has long been known as a refuge when global markets are volatile.

In the previous phase of the Middle East escalation, Dubai's gold retail prices moved much more wildly. 24 karat gold rose from the range of 590 dirhams in mid-February to over 636 dirhams at the end of that month, before falling and stabilizing.

Analysts at the time said the strengthening of the dollar, rising yields, inflation concerns, and profit-taking actions held back the gold rally.

A similar pattern is now seen again, but the movement is more cautious. The demand for gold as a safe asset has not disappeared. However, gold is still facing a strong dollar, interest rate expectations, and uncertainty as to whether the latest escalation will really disrupt oil supplies and inflation for a long time.

Pepperstone Research Strategist Dilin Wu said gold was between two big pulls.

"Gold is really in a tug-of-war right now. The rise is clearly held back, but the decline is also limited," said Wu.

According to Wu, the new escalation of the US-Iran made oil prices rise, triggering renewed inflation concerns, and pushing interest rate hikes towards tighter policies. This condition makes the interest rate barrier against gold reappear. The flow of funds to safe assets also still prefers the dollar to gold.

However, the gold opportunity to rise is not closed. Wu said June's nonfarm payrolls or NFP data shook the narrative of the US labor market which is still strong and forced the Fed to reconsider the pace of tightening.

Central bank gold purchases, especially from emerging markets, are also still providing a foothold for prices in the medium term.

The next direction of gold will be determined by two things. First, the flow of energy shipments through the Strait of Hormuz. If disrupted, oil prices could rise again and add to the burden of inflation. Second, US consumer inflation data or CPI on July 14 and Kevin Warsh's testimony in Congress.

Markets expect U.S. headline inflation to ease slightly from 4.2 percent to 3.9 percent. If the figure falls below 4 percent, the Fed has more room to hold interest rates and gold could get a boost.

If inflation remains high, yields could rise, the dollar could strengthen, and gold could be pressured again.

"In my opinion, the $4,000 to $4,200 range is a very uncertain trading range at the moment. Instead of taking a strong direction, traders are likely to wait for more data confirmation before daring to enter. CPI on the 14th is a decisive moment," said Wu.

For buyers in Dubai, the current price of 24-karat gold is still far below the level of 522.25 dirhams on June 16 and 509.25 dirhams on June 18. However, prices have not yet fallen below the low point of late June.

This condition makes buyers tend to wait, especially those who want to buy jewelry or small gold bars when prices correct.

Gulf News also noted a deeper decline in the likelihood of needing a stronger dollar, higher yields, or clear signs that demand for gold as a safe asset is beginning to fade.

Conversely, an increase could occur if US inflation data is lower, the dollar weakens, central bank purchases continue, or a new escalation is seen by the market as a larger macro shock.

For now, Dubai gold prices have erased the early July gains. Traders are still waiting for data that will determine whether gold moves towards $4,200 or returns to $4,000 per ounce.