A noticeable decline in gold prices globally and locally
The precious metals market witnessed sharp declines during trading at the end of the week, with gold prices towards significant weekly losses. In the Saudi market, this global decline was directly reflected in local prices, with the price of a gram of 18-karat gold falling to 412 Saudi riyals. This decline comes amidst accelerating global economic fluctuations and cautious investment trends, with investors awaiting the outcome of global monetary policies and their impact on safe-haven assets.
Gold prices in Saudi Arabia: 18, 21 and 24 karat
Domestically in Saudi Arabia, according to the latest data on gold prices in Saudi Riyals, the price of a gram of 18-karat gold (before VAT and manufacturing fees) has fallen to 412 Riyals. Meanwhile, the price of a gram of 21-karat gold, the most popular and in-demand type in the local market, reached approximately 481 Riyals. As for pure 24-karat gold, preferred by investors for creating bullion and savings, its price remained stable at around 550 Riyals. It is a well-established economic principle that the final price for the consumer varies depending on the manufacturing costs charged by jewelers, which differ from one design to another.
Inflation and tight monetary policies
Historically, gold has been considered a safe haven for investors during times of crisis and economic turmoil. However, the current landscape presents a different dynamic; soaring global energy prices have fueled fears of escalating inflation. This exceptional situation has reinforced expectations that major central banks will continue to adopt tight monetary policies, primarily by raising interest rates. Since gold is a non-yielding asset, the expectation of continued such policies makes it less attractive to investors compared to other assets like bonds.
The strength of the dollar and its direct impact on gold
Conversely, the US dollar benefited significantly from these economic developments. The dollar index – which measures the performance of the US currency against a basket of six major global currencies – rose 0.3% to 99.11, surpassing its 1% gains earlier in the week. A stronger dollar makes gold more expensive for buyers holding other currencies, thus putting pressure on global demand and consequently driving down prices.
The US-China summit and expert predictions
On the geopolitical front, traders and investors are closely watching the outcome of the US-China summit. This summit is of paramount international importance, as any agreement or escalation between the world's two largest economies will directly impact global trade and risk appetite. Looking ahead, ANZ Bank has lowered its year-end gold price forecast by $200 to $5,600, warning that the continued strength of the dollar and bond yields will remain a significant obstacle to a price recovery in the foreseeable future.
