Gold’s Role in the Economy

Gold prices in Saudi Arabia fell on Monday, with the price per gram dropping to 490.68 Saudi Riyals (SAR) from 495.73 SAR on Friday. For a tola, the price decreased to SAR 5,723.22 from 5,782.10 SAR on Friday.

FXStreet provides gold price calculations by adapting international prices (USD/SAR) to local currency and measurements, updating prices daily based on market rates. However, actual local rates may differ slightly from these reference values.

Gold plays a role as both a store of value and a medium of exchange. It is widely used as a safe-haven asset, offering a hedge against inflation and currency depreciation. Central banks, which are the largest gold holders, use it to diversify reserves, supporting currency and economic stability.

The precious metal has an inverse correlation with both the US Dollar and US Treasuries. When the Dollar decreases, gold tends to rise, providing asset diversification. Conversely, a stock market rally might weaken gold prices, whereas a sell-off in riskier markets can make it more attractive.

Geopolitical instability or recession fears can push gold prices up because of its safe-haven status. Lower interest rates tend to increase gold’s value as a yield-less asset, while higher rates generally decrease it. The US Dollar’s strength is a key factor influencing gold prices, given its pricing in USD (XAU/USD).

Short Term Fluctuations and Long Term Trends

We are seeing a slight dip in gold prices, which can be seen as a short-term fluctuation. Traders should view this as a potential entry point rather than a change in the underlying trend. The broader economic environment is what will dictate gold’s direction in the weeks ahead.

The US Federal Reserve has signaled a pause to the aggressive interest rate hikes we saw through 2023 and 2024. Recent US inflation data for September 2025 came in at 2.8%, slightly below forecasts, easing pressure for further tightening. This pivot typically weakens the US Dollar and is historically bullish for gold, as it reduces the opportunity cost of holding the non-yielding metal.

Geopolitical tensions are also providing support, with renewed maritime trade disputes in Southeast Asia causing uncertainty in global equity markets. The S&P 500 has pulled back 4% from its summer 2025 highs, prompting a flight to safe-haven assets. This risk-off sentiment reinforces gold’s role as a key portfolio hedge during turbulent times.

Central banks continue to be significant buyers, providing a strong floor for prices. Data from the World Gold Council for the third quarter of 2025 shows that central banks globally added another 250 tonnes to their reserves. This consistent demand, a continuation of the trend seen since 2022, suggests large institutions are insuring themselves against currency depreciation and volatility.

Given this backdrop, derivative traders should consider bullish strategies over the next 4 to 8 weeks. Buying call options or establishing bull call spreads could capitalize on expected upside movement. We should be targeting strikes above the $2,400 per ounce level, as a weaker dollar and rising uncertainty could easily push prices toward new highs.

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