Gold and silver surged to fresh all-time highs, capping their strongest annual performance in over four decades as investors reacted to escalating geopolitical tensions and growing expectations of US interest rate cuts.
Gold climbed more than 1.5% to break past its previous record of $4,381 an ounce set in October, while silver jumped as much as 3.4%, nearing the $70-an-ounce mark. Both metals are now on track for their best yearly gains since 1979.
The rally is being fuelled by mounting expectations that the US Federal Reserve will cut interest rates twice in 2026. US President Donald Trump’s public calls for looser monetary policy have further reinforced these bets. Lower interest rates typically benefit precious metals, which do not offer yields, making them more attractive when borrowing costs fall.
Geopolitical Tensions Boost Safe-Haven Demand
Heightened geopolitical risks have strengthened gold and silver’s appeal as safe-haven assets. The United States has intensified its oil blockade against Venezuela, increasing pressure on President Nicolás Maduro’s government. Meanwhile, Ukraine has reportedly attacked an oil tanker from Russia’s so-called shadow fleet in the Mediterranean Sea for the first time, adding another layer of uncertainty to global energy markets. These developments have reinforced investor demand for assets traditionally seen as stores of value during periods of instability.
Central Banks, ETFs, and the ‘Debasement Trade’ Drive Gold’s Rise
Gold prices have climbed nearly 70% this year, supported by strong central-bank buying and sustained inflows into gold-backed exchange-traded funds (ETFs). According to Bloomberg data, gold-backed ETFs have recorded inflows for four consecutive weeks, while World Gold Council figures show holdings increased in every month this year except May. Investor behaviour has also played a key role. Concerns around rising sovereign debt levels and currency debasement have pushed investors away from bonds and fiat currencies and toward hard assets like gold.
Trump’s aggressive approach to global trade and his comments questioning the independence of the US central bank earlier this year further amplified the rally.
Broader Precious Metals Also Climb
Other precious metals joined the rally, with palladium rising more than 4%. Platinum extended its gains for an eighth consecutive session, trading above $2,000 an ounce for the first time since 2008.
UAE Markets: Consolidation After a Strong Rebound
Providing insight into local market performance, Vijay Valecha, Chief Investment Officer at Century Financial, noted that UAE equities have entered a consolidation phase after a sharp rebound from late-November lows.
The DFM General Index traded in a narrow range between 6,039 and 6,125 during the week. It closed around 6,106 on Friday, remaining above key moving averages on the daily chart but still about 2.06% below its 52-week high of 6,235.81.
The ADX General Index declined in four of the last five sessions, ending the week near 9,989. It remained range-bound between 9,935 and 10,016, staying below both the 50-day and 100-day simple moving averages, which may act as resistance unless stronger catalysts emerge.
Oil Prices, Profit Booking Shape Market Sentiment
Several factors influenced Emirati equities during the week. Efforts to negotiate a ceasefire between Russia and Ukraine weighed on crude oil prices, pushing them toward a second straight weekly decline and putting some pressure on regional stocks. At the same time, profit booking followed the strong rally seen in both indices since late November. Despite this consolidation, the broader outlook for UAE markets remains positive.
Foreign investor activity remains supportive, with the five-day moving average of net foreign inflows into Dubai stocks rising to $11.8 million, significantly higher than the 20-day average of $811,302.
Sector Performance: Winners and Laggards
In Dubai, Utilities led gains with a rise of 2.84%, followed by Consumer Staples at 1.83% and Industrials at 1.75%. Consumer Discretionary and Real Estate were the weakest performers, declining 2.75% and 1.28%, respectively. In Abu Dhabi, most sectors ended the week lower, except Financials. Industrials and healthcare saw the steepest drops, each falling more than 5% and 3%, respectively.
The upcoming earnings calendar is relatively quiet, with only Sagasse Investment Holding and Emirates REIT Plc scheduled to release quarterly results. While the UAE economy remains well-diversified with over 75% of GDP generated from non-oil sectors, short-term market movements could still be influenced by oil price fluctuations. Additionally, upcoming US data on employment, retail sales, and inflation will be closely watched, as they could shape expectations around future Federal Reserve policy and influence near-term sentiment in UAE markets.
