Gold soars past $3,500, shaking Middle Eastern markets and souks

Gold prices skyrocketed past $3,500 an ounce, sparking a ripple effect throughout Middle Eastern markets and souks and sending investors and buyers flocking to jump on the gold wave.  

The meteoric rise of the metal comes amid broader economic tremors triggered by US President Donald Trump’s aggressive tariff manoeuvres and his blistering attack on the Federal Reserve chair, Jerome Powell.

Last week, Trump targeted Powell over a warning that the sweeping levies could reignite inflation, threatening that his "termination cannot come fast enough". "I'm not happy with him. I let him know it, and if I want him out, he'll be out of there real fast, believe me," he said.

The uncertainty of the fallout has supercharged demand for gold, a traditional haven in turbulent times. Spot gold touched $3,500.05 early Tuesday, with US futures climbing 1.2% to $3,464.50. This marks a 20% jump in 2025 alone.

Dubai bullion bling 

In the bustling 'City of Gold' in Dubai, the golden storm has been particularly felt, with prices jumping to Dh420 per gram, up from Dh405.25 earlier in the week.

According to Andrew Naylor of the World Gold Council, the rise has created a "two-fold effect". Investors are drawn to gold as a stable asset amidst geopolitical tensions, while the steep prices discourage those looking to purchase gold jewellery for cultural and ceremonial purposes.

Dubai has long been a nexus for gold trade, attracting merchants from Iran and India, where 22-karat gold is deeply ingrained in cultural traditions. However, with gold prices climbing by 27% last year, demand for gold jewellery in the UAE dropped by 13%, outpacing a global decline of 11%.

This shift indicates that consumers, particularly in India, are reacting to price volatility rather than static price points, a trend that is affecting Gulf markets where Indian buyers are key players.

Gold retailers in the UAE are responding with innovative strategies to counteract the effects of soaring prices. These include reducing charges, offering flexible payment plans, and introducing lightweight jewellery collections.

When the US sneezes...

It is not hyperbole to say that the trump administration is jeopardising a cornerstone of the world economy.

The impact of the ‘US sneeze’ effect has been such that Goldman Sachs has recently adjusted its end-2025 forecast for gold to $3,700 per ounce, with potential highs reaching $4,500. Russ Mould from AJ Bell warned that "higher gold prices are likely to dampen demand for jewellery".

Dubai-based Century Financial chief investment officer As Vijay Valecha told Reuters that the current market conditions represent "uncharted territory for everyone in the industry". Consumers are split between those waiting for prices to drop and those rushing to buy before they rise even further.

Central banks are accelerating their gold purchases as a bulwark against a weakening dollar and geopolitical turmoil. According to ADM Investor Services, this buying spree underscores growing concerns over Trump’s trade war, US fiscal instability, and the potential politicisation of the Fed.

Beyond gold, silver, platinum, and palladium have also seen significant gains. Spot silver, for instance, rose 0.7% to $32.36 an ounce, tracking gold’s momentum. The rise of alternative gems is also notable: India exported $171 million worth of lab-grown diamonds to the UAE last year, a 57% jump from two years ago.