Gold being one of the most selling precious metals is always in demand. In terms of its nature as a metal and as a product/commodity has essential and interesting history. Gold has played a vital role in many cultures, traditions and religions. In many instances’ gold is considered to often be linked with good luck and fortune and financial status. In many countries especially, India and in many Arab nations’ culture Gold’s demand shoots up during the wedding and festive season as a part of gifting and fashion which leads to increase in gold price in UAE.
A wide known fact/ reality that the gold prices are extremely dynamic in nature and it changes from minute to minute, have you ever been curious as to why the gold prices are so dynamic in nature? Many factors affect the gold prices in UAE and across the globe. Let’s find out the different reasons that affect the gold prices in UAE in its direct or indirect nature, Here a few:
The economic market in general is quite uncertain and is prone to inflation or deflation. Gold in that context is quite steady and safe and is often termed as Safe haven for investors, hence many investors prefer to keep gold as investment rather than currency/ shares. Such trends lead to an increase in demand for gold which stipulates an increase in price of the gold, this a worldwide phenomenon not just limited to UAE.
UAE being the biggest sellers of gold across the globe, any fluctuations or movements in gold globally affects the prices in UAE, hence international prices or rates affects the local/domestic market as well.
Government Gold Reserves
All major banks tend to hold gold reserves as it’s a very liquid asset and a hedge against inflations, Trade tensions, geopolitical issues, and threats of sanctions, hence when banks hold large reserves the supply of gold decreases and hence this increases the prices/ rate of Gold.
During festive and wedding seasons the gold jewellery purchase increases and hence there is an incline in demand. Due to which there is an imbalance in the supply and demand in the gold market which causes the gold rate in UAE to spike.
Interest Rate Trends
Interest rates a play a vital role and is closely associated with the demand or selling of gold metal. When the interest rates are high, people tend to sell their gold and get liquid cash to invest and get higher returns through high interest rates, hence when there is a spike in the supply of gold, the gold prices in UAE decreases.
Value of International Currency
As to day to day in normal circumstances, the value of forex (foreign currency) are inversely proportionate. The USD plays a major factor and hence any change in value is reflected upon the gold price in UAE.
Other than the factors/reasons mention in this blog, many other factors that might influence the gold prices in UAE are production of Gold, geo-political instability, source of metal, Mining, Governmental laws, culture, etc. But overall the most crucial aspect/ factor affecting the gold price in UAE is the demand and Supply of gold. As the per recent data by the gold council, about approximately a 1000 Tons is short in supply than its demand. It can be concluded that the overall concept revolves around the supply and demand of gold that affect the prices of gold in UAE or across the globe.