Gold surged to yet another record on Tuesday, powered by expectations that the US Federal Reserve will deliver its first rate cut in more than a year this week.
Investors are betting not just on a quarter-point reduction but also on the prospect of further easing as the world’s largest economy shows signs of strain.
The Fed, which has held its benchmark rate steady for five consecutive meetings, is widely expected to cut by 25 basis points on September 17, bringing the policy rate closer to 4.1 per cent.
Bullion climbed to $3,686 an ounce in Asia, surpassing Monday’s all-time high of $3,685, buoyed by a weakening dollar that touched a seven-week low. Gold has now risen more than 40 per cent this year, outperforming major asset classes including the S&P 500. Analysts point to central bank buying, strong exchange-traded fund inflows, and persistent geopolitical uncertainty as reinforcing factors. Goldman Sachs has suggested that bullion could approach $5,000 an ounce if even a small fraction of private Treasury holdings rotate into the metal.
The ripple effects of a Fed rate cut are expected to be significant for the Gulf countries, whose currencies are pegged to the dollar, obliging central banks in the region to broadly follow US monetary policy. A quarter-point cut from the Fed is therefore likely to be mirrored by the UAE Central Bank, the Saudi Central Bank (SAMA), and others. Lower borrowing costs could ease financing conditions for businesses and consumers, stimulate real estate activity, and support equity markets across the region.
For Gulf investors, the allure of gold is particularly strong as a hedge against dollar weakness and geopolitical uncertainty. The GCC, home to some of the world’s largest gold retail and wholesale markets, is already witnessing heightened demand. Simultaneously, softer rates could reinforce liquidity flows into stock markets in Dubai, Abu Dhabi, Riyadh, and Doha, sustaining the bullish momentum seen in recent months.
In the UAE, property analysts say the expected alignment with Fed policy could deliver a further boost to the already buoyant real estate market. Mortgage affordability, which had come under pressure after successive rate hikes since 2022, may improve, prompting stronger demand from both end-users and investors.
With Dubai’s residential transactions already breaking records in 2025 and Abu Dhabi seeing a steady rise in sales and mortgage activity, lower borrowing costs could add another layer of momentum to housing demand, particularly in mid-tier and affordable segments. Developers are also likely to benefit from cheaper financing for project launches, reinforcing confidence in the sector.
Lower interest rates may also reduce the cost of capital for state-owned energy giants and conglomerates pursuing diversification investments, while offering relief to corporates exposed to high debt servicing costs. On the flip side, central banks will remain cautious, as lower rates could stoke inflationary pressures in import-heavy economies.
For now, markets across the GCC are aligning with the global mood. The expectation of a Fed-driven monetary easing cycle is bolstering risk appetite, lifting equities and real estate valuations, while also driving gold into uncharted territory. The Fed’s decision this week could therefore shape not just the trajectory of US growth but also the monetary and investment climate across the Gulf.
Mounting evidence of US labour market weakness — from rising unemployment claims to the highest jobless rate since 2021 — has convinced markets that monetary loosening is inevitable. “For the first time in four years, there are more job seekers than jobs. That single ratio tells the Fed all it needs to know: rate cuts are back on the runway,” said Stephen Innes of SPI Asset Management.
The US central bank will also unveil its quarterly “dot plot” of interest rate projections, a guide investors will analyse for clues on the policy trajectory through 2026. Fed Chair Jerome Powell’s post-meeting press conference is likely to be critical in shaping expectations. While inflation remains elevated, the slowdown in hiring, a cooling housing market, and falling consumer confidence are feeding a feedback loop of weaker growth that the Fed is under pressure to address.
Political developments are adding to the dovish momentum. President Donald Trump has intensified calls for lower borrowing costs while moving to reshape the Fed’s leadership. His effort to oust Governor Lisa Cook and the swift Senate confirmation of economic adviser Stephen Miran to the Board of Governors underscore the White House’s growing influence on the rate-setting committee. Trump has also signalled upcoming talks with Chinese President Xi Jinping after the two sides reached a framework deal over TikTok, raising hopes of reduced trade tensions.
The prospect of easier US monetary policy has fuelled a rally across global equity markets. Wall Street’s S&P 500 and Nasdaq hit record highs overnight, with Asian bourses following suit. Tokyo, Hong Kong, Shanghai, and Seoul all posted gains, though Singapore and Wellington lagged. Investors are betting that sustained Fed easing, combined with signs of thawing US-China relations, could extend the bull-run in equities.
The dollar, meanwhile, remains under pressure, reinforcing gold’s rally. Silver hovered near a 14-year high, platinum edged lower, and palladium ticked higher. With investors repositioning for a multi-month cycle of rate cuts, gold’s role as a non-yielding hedge looks increasingly attractive.
