Gold price in Dubai: the two ways the Fed reaches buyers

The gold price in Dubai ended the week at about 454 dirhams a gram for 22-carat metal, by our calculation from Friday's New York close near $4,196 an ounce. That is up about Dh6 on the week, but still roughly Dh14 below where it stood on the day the Federal Reserve raised rates in September.

Why it matters: For Gulf buyers, one Fed decision lands twice: through the gold price, which has fallen since the hike, and through the dirham's dollar peg, which pushed UAE borrowing costs up the next day.

What does a gram of gold cost in Dubai this week?

Our price data converts the world price into dirhams at today's exchange rate of 3.6725 per dollar, the fixed rate of the dirham's peg. The figures below are metal value only, before the jeweller's margin, VAT and making charges.

Shop boards run a little higher. On Friday morning, before gold's late rally, published retail rates put 24-carat at about Dh501 a gram and 22-carat at about Dh464, each up Dh3.50 on the day, according to Angel One.

Over the past month, the 22-carat metal value has fallen about 5%, from near Dh478 to Dh454. The low of the month, about Dh445, came on Wednesday, the day the Fed's minutes kept more hikes in play.

Route one: the gold price itself

The Fed lifted its target range by a quarter point to 3.75% to 4.00% in September, its first increase since 2023. Higher US rates make a metal that pays no interest harder to hold, which is how the Fed moves the gold price. Spot gold closed near $4,328 on hike day and near $4,196 on Friday, a fall of 3.1% on our data.

Because the dirham never moves against the dollar, Dubai buyers get that fall in full, with no currency to soften or deepen it. A 20-gram 22-carat chain held about Dh9,370 of metal on hike day and about Dh9,080 now, a saving of nearly Dh290 before making charges.

Traders expect more tightening, just not straight away. Market pricing on Friday put the chance of an October hike near 18% and of a December hike near 82%, after Fed Governor Christopher Waller said rises need not come back to back.

Route two: the dollar peg

The Central Bank of the UAE raised its Base Rate by 25 basis points to 3.90%, from 3.65%, effective the day after the Fed's decision. The Base Rate is tied to the Fed's interest rate on reserve balances because the dirham is pegged to the dollar, so the UAE has little room to do otherwise.

On a Dh1 million variable-rate home loan, a quarter point adds about Dh2,500 a year in interest. A jeweller carrying Dh5 million of stock on a credit line pays about Dh12,500 a year more, just as shelves are being filled for the festive season.

So the same decision made the gram cheaper and the loan dearer. Savers gain on the other side: a Dh100,000 deposit tracking the Base Rate earns about Dh250 more a year.

Are buyers coming back to the Gold Souk?

Retailers say yes, and earlier than usual. When 24-carat slipped below Dh500 a gram last weekend, families started moving purchases planned for Navratri, Dhanteras and Diwali forward.

"Many families are bringing forward their festive purchases," Tawhid Abdulla, chairman of the Dubai Jewellery Group, told Khaleej Times. He said the lower prices "have come at an ideal moment" for shoppers who see the season as an auspicious time to buy.

"The combination of the price drop and festive timing creates a compound effect," said Chirag Vora, managing director of Bafleh Jewellers. He also pointed to the gap with India: "Dubai gold is priced at international spot rates, bypassing the import tariffs and GST levied on gold in India."

Anil Dhanak, managing director of Kanz Jewels, was more measured. "Ultimately, jewellery buying is not determined by the gold rate alone," he said, adding that a correction gives shoppers "an additional reason to act."

What to watch

• 14 Oct: US September consumer price index, the main test of whether the Fed hikes again in October
• 28 Oct: Fed decision; any change would move the UAE Base Rate within hours, as it did in September