Gold prices in the United Arab Emirates increased on Tuesday, with the price per gram rising to 456.47 AED from 452.63 AED on Monday. A tola, a traditional gold measurement, saw its price climb to 5,324.12 AED from 5,279.38 AED the previous day.
The rise in gold prices coincided with a 0.27% drop in the US Dollar Index to 97.91. US Treasury yields fell, with the 10-year note decreasing by three basis points to 4.141%, while real yields dropped to 1.761%.
Us Economic Indicators
In other economic news, US Pending Home Sales improved in August, growing by 4% compared to a July contraction. The current US PCE Price Index aligns with predictions, suggesting a potential 25 basis point Federal Reserve rate cut in October.
Central banks are significant gold holders, adding 1,136 tonnes worth $70 billion to their reserves in 2022. Emerging economies like China, India, and Turkey are notably increasing their gold reserves. Factors such as geopolitical instability and low interest rates can propel gold prices upward, largely influenced by the US Dollar’s performance.
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We are seeing gold prices find solid support as US Treasury yields continue their slow retreat from the highs we saw over the last couple of years. The 10-year yield is now hovering around 3.85%, a noticeable drop from the peaks of 2023 and 2024, which reduces the opportunity cost of holding a non-yielding asset like gold. This makes the environment for bullion more favorable than it has been in a long time.
Market focus is now firmly on the Federal Reserve’s next move, with inflation data from earlier this year showing a consistent cooling trend. The CME FedWatch Tool indicates a growing consensus that the Fed will begin its rate-cutting cycle in the first half of 2026. This expectation of future easing is putting gentle but persistent pressure on the US Dollar, providing another tailwind for gold.
Demand From Central Banks
The strong demand from central banks continues to provide a major floor for the price. Looking back, we know they purchased a record 1,136 tonnes in 2022 and followed that with another massive 1,037 tonnes in 2023. This trend of de-dollarization and reserve diversification by emerging market banks has not slowed, creating a steady source of demand that is independent of investor sentiment.
Ongoing global trade frictions and various regional conflicts are also keeping safe-haven demand alive. While we haven’t seen a major flight to safety recently, the underlying uncertainty encourages portfolio diversification into hard assets. Gold’s role as a hedge against geopolitical turbulence is as relevant today as it ever was.
Given this backdrop, we are seeing derivative traders position for a potential breakout in the coming months. Call options with expirations in early 2026 are becoming particularly popular, as they are a direct play on the anticipated Fed rate cuts. Traders are also looking at long-dated futures contracts to lock in current prices ahead of the expected move higher.
We must remember how resilient gold was during the aggressive rate-hiking cycle of 2022-2024, where it managed to hold its ground despite significant headwinds from rising yields. The fact that gold performed well in that difficult environment suggests it could react very positively now that monetary policy is expected to become an ally. This historical resilience should give traders confidence in the current setup.
