Gold reached another record high on Tuesday, driven by expectations that the US Federal Reserve will announce its first interest rate cut in over a year this week.
Investors are not only anticipating a quarter-point reduction but also foresee further easing as the largest global economy shows signs of stress.
The Fed, which has kept its benchmark rate unchanged for five meetings, is expected to cut by 25 basis points on September 17, aligning the policy rate closer to 4.1%.
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Bullion jumped to $3,686 an ounce in Asia, surpassing Monday’s record of $3,685, supported by a weakening dollar at a seven-week low. Gold has risen over 40% this year, outperforming major assets like the S&P 500. Analysts highlight central bank purchases, strong ETF inflows, and ongoing geopolitical uncertainties as key factors. Goldman Sachs predicts bullion could hit $5,000 an ounce if even a small portion of private Treasury holdings shift to gold.
The impact of a Fed rate cut is likely to be significant for Gulf countries, whose currencies are pegged to the dollar, prompting regional central banks to follow US monetary policy. A quarter-point cut from the Fed may be mirrored by the UAE Central Bank, Saudi Central Bank (SAMA), and others. Lower borrowing costs could improve financing for businesses and consumers, boost real estate activity, and support regional equity markets.
For Gulf investors, gold offers a strong hedge against dollar weakness and geopolitical uncertainty. The GCC, known for its large gold retail and wholesale markets, is seeing increased demand. At the same time, lower rates could enhance liquidity flows into stock markets in Dubai, Abu Dhabi, Riyadh, and Doha, maintaining recent bullish trends.
In the UAE, property experts suggest that aligning with Fed policy could further boost the thriving real estate market. Mortgage affordability, under pressure from rate hikes since 2022, may improve, driving demand from end-users and investors.
With Dubai’s residential transactions reaching new heights in 2025 and Abu Dhabi experiencing rising sales and mortgage activity, lower borrowing costs could enhance housing demand, especially in mid-tier and affordable segments. Developers may benefit from cheaper financing for projects, boosting sector confidence.
Lower interest rates might also reduce capital costs for state-owned energy companies and conglomerates pursuing diversification, while alleviating high debt service costs for corporates. However, central banks remain cautious, as lower rates could increase inflation in import-heavy economies.
Currently, GCC markets are aligning with global sentiment. The expectation of Fed-led monetary easing is boosting risk appetite, lifting equities and real estate valuations, and driving gold into new territory. The Fed’s decision this week could shape US growth trajectories and influence monetary and investment climates in the Gulf.
Evidence of US labor market weakness—rising unemployment claims and the highest jobless rate since 2021—convinces markets that monetary easing is inevitable. “For the first time in four years, there are more job seekers than jobs. This ratio tells the Fed it’s time for rate cuts,” stated Stephen Innes of SPI Asset Management.
The US central bank will also release its quarterly “dot plot” of interest rate projections, providing investors guidance on policy trajectories through 2026. Fed Chair Jerome Powell’s post-meeting press conference will likely be critical in shaping expectations. While inflation stays high, hiring slows, the housing market cools, and consumer confidence drops, the Fed is under pressure to address this feedback loop of weaker growth.
Political developments add to the dovish momentum. President Donald Trump calls for lower borrowing costs while reshaping the Fed’s leadership. His move to replace Governor Lisa Cook and the swift Senate confirmation of economic adviser Stephen Miran to the Board of Governors highlight the White House’s growing influence on the rate-setting committee. Trump also hints at talks with Chinese President Xi Jinping following a framework deal over TikTok, raising hopes of reduced trade tensions.
The prospect of easier US monetary policy has driven a global equity market rally. Wall Street’s S&P 500 and Nasdaq reached record highs overnight, with Asian markets following. Tokyo, Hong Kong, Shanghai, and Seoul posted gains, while Singapore and Wellington lagged. Investors bet that continued Fed easing and signs of improving US-China relations could extend the equity bull run.
The dollar remains under pressure, boosting gold’s rally. Silver nears a 14-year high, platinum dips, and palladium rises. With investors adjusting for a multi-month rate cut cycle, gold’s role as a non-yielding hedge becomes increasingly appealing.
