Gold prices in Saudi Arabia rose on Monday, reaching 489.36 Saudi Riyals (SAR) per gram and 5,707.77 SAR per tola. This is an increase from Friday’s prices of 484.58 SAR per gram and 5,652.02 SAR per tola, according to FXStreet. FXStreet sets gold prices based on international rates and adjusts them to local currency at the time of publication. These prices serve as references; local prices may vary based on market conditions.

Gold as a Store of Value

Gold has always been valued as a store of wealth and a means of exchange. It’s considered a safe investment, protecting against inflation and currency drop because it is not tied to any issuer or government. Central banks hold a lot of gold to support their economies and boost confidence in their currencies. In 2022, they purchased 1,136 tonnes worth $70 billion, the highest amount on record, especially from emerging economies like China, India, and Turkey. Gold often moves in the opposite direction of the US Dollar and US Treasuries. When the Dollar weakens, the price of gold tends to rise. At the same time, stock market gains can lower gold prices. Geopolitical tensions and fears of recession can further influence gold prices due to its safe-haven status, and interest rates play a key role in this. With gold’s recent strength, it seems to be set for further gains. The US Dollar Index (DXY), which was above 104 for most of 2024, has dropped significantly and is now around 98. This ongoing weakness in the dollar is creating a strong boost for gold and other assets priced in dollars.

Interest Rate Expectations and Market Speculation

As gold doesn’t generate income, it is very sensitive to interest rate changes. The market is now anticipating a shift from the Federal Reserve. After a series of rate hikes in 2023 to combat inflation, recent weak economic indicators are leading to speculation of possible rate cuts in early 2026. Traders in derivatives might want to consider long-dated call options to take advantage of this possible change in policy. We also see ongoing support from central bank demand, which has continued at record levels since the 1,136 tonnes purchased in 2022. The World Gold Council has reported that central banks, especially in emerging markets, have remained net buyers throughout 2024 and 2025, helping to absorb any significant price drops. This consistent buying reduces the downside risk for bullish futures positions. Moreover, gold remains a crucial hedge against inflation and instability for investment portfolios. Recent US Consumer Price Index (CPI) data indicates inflation is still stubbornly above 3%. Increased geopolitical tensions, particularly in the Strait of Hormuz, add to gold’s appeal as a safe-haven asset. In this context, investors might consider strategies like buying puts on broad market indices while also taking long positions in gold. The current uncertainty provides a perfect setting for volatility trading. The implied volatility in gold options may not completely reflect the potential for a sudden price move if the Fed indicates a change in policy sooner than anticipated. Traders could look at strategies like buying straddles or strangles to benefit from significant price shifts in either direction over the coming months. Create your live VT Markets account and start trading now.

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