Gold prices retreated on Wednesday, May 7, 2025, as optimism surrounding potential U.S.-China trade talks diminished demand for safe-haven assets. This shift in sentiment came as investors prepared for the Federal Reserve's policy meeting later in the day.
In Dubai, gold rates experienced a slight uptick. The price of 24-carat gold increased by AED2.25, reaching AED409.00. Similarly, 22-carat gold rose by AED2.00, bringing its value to AED378.50. Additionally, 21-carat gold saw a gain of AED2.00, now priced at AED363.00, while 18-carat gold climbed by AED1.75 to AED311.25.
Despite these local increases, spot gold declined by 1.2 percent to $3,388.67 an ounce as of 02:25 GMT, currently trading at $3,384.86. U.S. gold futures also experienced a decrease, falling 0.7 percent to $3,397.70, with current trading at $3,385.32.
According to Reuters, Ilya Spivak, head of global macro at Tastylive, noted, "I think gold seems to be pulling back amid a broad-based ‘risk on’ move across markets … this is a pro-cyclical configuration that might echo optimism amid clues that the U.S. and China have started real trade negotiations."
In the midst of these fluctuations, U.S. Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer are scheduled to meet with top Chinese economic official He Lifeng in Switzerland this weekend for discussions. This meeting follows a period of heightened tensions, as both nations imposed tit-for-tat tariffs on each other last month, igniting a trade war that has raised concerns about a global recession.
Asian traders responded positively to the overnight news, leading to a reduction in safe-haven flows and diminishing demand for gold prices as a traditional store of value. The U.S. Dollar strengthened as optimism surrounding U.S.-China trade alleviated worries regarding economic growth.
Market focus is now directed toward the Federal Open Market Committee (FOMC) meeting later today, where the U.S. central bank is expected to maintain steady interest rates. The FOMC is anticipated to remain vague to preserve flexibility as it navigates the implications of the ongoing trade war for growth and inflation, Spivak mentioned.
Traders currently expect 80 basis points of rate cuts this year, beginning in July. Comments from Fed Chair Jerome Powell are highly anticipated for insights into the timing of potential future rate reductions. Powell is likely to adhere to the Fed’s cautious stance, hinting at a wait-and-see approach due to uncertainty surrounding the effects of U.S. tariffs. Should he acknowledge resilience in the economy, it could signal a hawkish shift in the Fed’s policy, potentially countering June rate cut expectations and resulting in a stronger U.S. Dollar. Consequently, gold prices could extend their correction from two-week highs.
The volatility in gold prices is also evident in the UAE market, where shoppers have witnessed extreme fluctuations. A gram of 22K gold was priced at Dh381.75 on the evening of May 6, 2025, beating the previous high by 25 fils, but by the morning of May 7, it had shed some of those gains, dropping to Dh375.25. Meanwhile, the price of 24K gold fell from Dh412.5 to Dh405.25.
Retailers note that gold jewelry shopping is becoming limited to special occasions, with many consumers opting to invest through monthly installments instead. "Gold jewellery shopping is back to being limited to special occasions," said a retailer. "But there is a lot of activity still around gold, but principally in investing through the monthly instalments."
As shoppers in the UAE consider their next moves, many are choosing to wait for the Federal Reserve's meeting before making purchases. A jeweler advised, "Shoppers are definitely better off waiting this out. It's going to be a long day for the UAE gold trade."
In Egypt, gold prices collectively increased on May 6, 2025, with the 24-karat hitting EGP 5,491.5 per gram for buying and EGP 5,520 for selling, according to iSagha’s data. The 22-karat gold price climbed to EGP 5,033.75 for purchasing and EGP 5,060 per gram for selling, while the 21-karat rose to EGP 4,805 per gram for buying and EGP 4,830 for selling. The 18-karat gold price also hiked to EGP 4,118.5 per gram for purchasing and EGP 4,140 for selling.
The gold pound’s price jumped to EGP 38,440 for buying and EGP 38,640 for selling. Meanwhile, the price of the gold ounce hit $3,392.68 for buying and $3,392.97 for selling.
The United Arab Emirates has established itself as a key player in the global gold trade, with over a third of its imports consisting of gold reserves. The primary markets for the UAE include India, Switzerland, and the USA, with gold imports reaching a substantial $20 billion in 2019, marking a notable increase from the preceding year. The demand for gold in the UAE is predominantly fueled by consumer purchases of jewelry, representing nearly half of all gold transactions.
Despite domestic production, which is supplemented by imports primarily from Africa and Europe, the UAE relies heavily on global markets to meet its gold supply requirements. Looking ahead, the UAE's gold market is poised to navigate various geopolitical and economic factors that may influence its trajectory. Fluctuations in oil prices and concerns regarding global economic growth could potentially impact demand for gold products.
Nevertheless, the nation's robust infrastructure, supportive governmental policies, and active engagement in international initiatives signal a promising outlook for its continued dominance in the industry. As the market evolves, the transition from physical gold to digital investments may present challenges to the UAE's position as a prominent trading hub for precious metals.
In summary, while gold prices are currently experiencing volatility, the underlying demand remains strong, particularly in regions like the UAE and Egypt, where cultural ties to gold jewelry continue to drive consumer interest. As the global economic landscape shifts, traders and consumers alike will be watching closely for indications of future price movements and potential investment opportunities.
