When Will Gold Prices Drop in Saudi Arabia? Detailed Analysis

The price of gold in Saudi Arabia is almost entirely determined based on the global price of an ounce of gold in US dollars, converted directly to Saudi riyals at a fixed exchange rate (3.75 riyals per dollar). The Saudi Arabian Monetary Authority (SAMA) publishes daily official prices for 24-carat gold per gram, based on the average global opening prices (fixing). Local gold shops and jewelers add a profit margin (spread) and manufacturing costs when selling to the final consumer.

The pricing process is based on the close relationship between the riyal and the dollar, so any change in the global price of an ounce is expected to have an almost immediate reflection on the local price. For example, if the global price of an ounce rises by 2%, gold prices in Saudi Arabia are expected to rise by approximately the same percentage. It is worth noting that gold in Saudi Arabia is sold in various forms: bars, jewelry, or gold savings certificates through some banks. Gold jewelry is subject to a value-added tax (15%), while investment bars are often exempt from this tax.

This pricing system makes the Saudi market highly sensitive to global fluctuations, keeping local factors (such as seasons or consumer demand) secondary in comparison.

Global factors play the largest role in determining gold price trends in Saudi Arabia. The most significant of these factors include:

1. Global Interest Rates: When the US Federal Reserve raises interest rates, the attractiveness of yield-bearing assets (such as bonds) increases, leading to a decrease in demand for gold (as it is a non-yielding asset), often resulting in a price decline. Conversely, when interest rates are lowered, investors tend to favor gold as a hedge.

2. Inflation Rates: Rising global inflation drives investors to hedge through gold, leading to increased demand and price. In cases of low or controlled inflation, demand for gold decreases, putting downward pressure on prices.

3. Strength of the US Dollar: Gold often moves inversely to the dollar. As the dollar strengthens against global currencies, gold becomes more expensive for holders of other currencies, reducing demand and price.

4. Geopolitical Tensions and Economic Crises: Wars, financial crises, or negative global news drive demand for gold as a safe haven, while political and economic stability leads to decreased demand.

All these influences collectively determine the path of gold, which the Saudi market closely follows.

Although the largest impact comes from abroad, there are local factors that partially affect gold prices in Saudi Arabia:

1. Seasonal Demand: Buying activity increases during holidays, wedding seasons, and Ramadan, driving local demand for gold jewelry up.

2. Consumer Purchasing Power: Increased income or availability of extra liquidity (for example, with government bonuses or improved local economic performance) can temporarily boost local demand.

3. Value-Added Tax: The tax applied to gold jewelry increases the final purchase cost, which may limit consumer demand during periods of rising prices.

4. Local Bank Policies: Some banks offer gold savings products or investment certificates, playing a role in stimulating investment demand for gold.

Nevertheless, the local impact remains relatively limited, as prices follow the global market due to the dollar peg.

Gold prices in Saudi Arabia typically decline when a combination of global and local conditions are met, including:

1. Global Interest Rate Hikes: When the Federal Reserve or major central banks announce sudden or strong interest rate increases, investors tend to shift towards fixed-income assets, reducing demand for gold.

2. Improvement in Economic Indicators: If data shows strong economic growth in the US, China, or other major regions, demand for gold as a safe haven decreases.

3. Reduction in Global Tensions: The resolution of geopolitical crises or political breakthroughs reduces fear among investors, leading to a decline in gold prices.

4. Rise in Global Stock Markets: When financial markets rise significantly, risk appetite increases, and investors shift from gold to stocks.

5. Strength of the Dollar: Any significant increase in the dollar against other currencies puts downward pressure on global gold prices, which quickly reflects in the Saudi market.

In other words, a drop in gold prices in Saudi Arabia is not as much linked to local events as it is a reflection of global economic trends and international monetary policy.

One of the key features of the Saudi gold market is that the Saudi riyal is pegged to the US dollar at a fixed exchange rate (3.75 riyals per dollar). This peg causes gold prices in Saudi Arabia to move in tandem with fluctuations in global ounce prices.

Any change in the dollar's value against global currencies affects gold, as dollar strength is typically matched by declines in gold, and vice versa. Because the riyal is linked to the dollar, any strength or weakness in the US currency is immediately transferred to the Saudi market.

This means that factors affecting the dollar (such as US Federal Reserve policies, US economic data, and trade tensions) indirectly influence gold prices in Saudi Arabia. Locally, supply and demand play a secondary role, while the primary movement remains tied to the dollar and global prices.

Gold prices experienced notable fluctuations during 2024 and 2025. The global price of an ounce rose from around $2000 at the beginning of 2024 to historic levels nearing $2400 in mid-2025, before slightly retreating during certain periods due to tightening monetary policies.

Locally, the price of 24-carat gold per gram ranged between 212 riyals in early 2024 and 235–240 riyals in the mid-months of 2025, according to data published by SAMA and local market sites. On days when there was a global drop in gold prices (for example, following statements from the US Federal Reserve about raising interest rates), the price per gram fell to around 205 riyals.

These figures reflect that the Saudi market moves almost identically with the global market, with limited influence from local seasons or internal variables. Therefore, monitoring global news and indicators remains key to understanding gold price trends in the Kingdom.

Monetary policy, particularly interest rate decisions by the US Federal Reserve, plays a pivotal role in determining gold prices both globally and locally. When interest rates are low or expected to be lowered, gold becomes more attractive to investors, as it does not yield bank returns, leading to price increases. Conversely, when interest rates are raised, gold's attractiveness declines, resulting in decreased demand and price.

During 2024–2025, markets closely monitored US inflation data and statements from Federal Reserve officials. Any indication of continued interest rate hikes or monetary tightening pushed gold prices down, while statements about declining inflation or intentions to lower rates drove prices up.

In Saudi Arabia, this effect is quickly transmitted due to the riyal's peg to the dollar, making any development in US monetary policy have an immediate impact on local gold prices.

Inflation is one of the most significant factors driving investors to gold as a hedging asset. When global inflation rates rise, the purchasing power of currencies declines, increasing demand for gold to preserve value. The year 2024 witnessed global inflation waves, particularly in the US and Europe, contributing to rising gold prices.

In Saudi Arabia, inflation remained within moderate levels (1–4%), but with the riyal pegged to the dollar, the larger impact came from US and global inflation. As expectations for accelerating global inflation rise, local demand for gold increases, and vice versa.

When inflation declines or positive economic data about global price stability is released, demand for gold often decreases, leading to a decline in its price.

Geopolitical tensions and global events play a significant role in driving gold prices. Political crises, wars, and security events typically push investors towards gold as a safe haven.

For example, at the end of 2025, North Korea announced the continuation of its missile development, creating uncertainty in the markets and driving gold prices up. Any indications of escalating conflicts or crises (whether in Asia, Europe, or the Middle East) increase demand for gold.

Conversely, when tensions ease or major crises are resolved, demand for gold as a haven decreases, leading to price declines. This pattern recurs continuously and is one of the key indicators monitored by those interested in the gold market in Saudi Arabia.

There are no Saudi listed companies directly specialized in mining raw gold, but there are companies that play a role in the precious metals sector, the most prominent being Ma'aden (Saudi Arabian Mining Co.), listed on the Saudi stock market under symbol 1211.

Ma'aden's activities include gold mines and markets among its various projects, alongside phosphate and aluminum. The performance of Ma'aden's stock is partially linked to movements in global gold and metal prices. In 2024, the stock price was around 90 riyals with a market capitalization exceeding 100 billion riyals, a price-to-earnings (P/E) ratio between 20 and 25, and annual dividends between 3 and 4%.

The jewelry sector in Saudi Arabia is dominated by individual jewelers and family businesses, and there are no official trading data for such entities in the financial market.

Gold competes with several alternative investments in Saudi Arabia, the most important of which include:

1. Silver and other precious metals: Often move in the same direction as gold but are less popular as a safe haven.

2. Stocks and bonds: When financial markets are stable or rising, investors may prefer stocks and bonds over gold.

3. Real estate: A traditional alternative in Saudi Arabia, especially during periods of declining interest rates.

4. Foreign currencies and cryptocurrencies: The dollar acts as a direct competitor to gold due to the peg, and some investors are turning to cryptocurrencies like Bitcoin as a modern alternative.

As gold prices rise significantly or taxes on gold jewelry increase, some liquidity may shift to alternative options, putting pressure on gold demand and helping to lower its price.

Although global factors determine gold prices, local demand in Saudi Arabia remains an important element during certain seasons. Demand for gold jewelry increases during religious holidays, wedding seasons, and long vacations, as gold is part of social customs in gifts and occasions.

Some unofficial estimates suggest that Saudi Arabia imported about 50 tons of gold during 2024, most of which was used in jewelry and bars. However, this demand is secondarily affected compared to global market fluctuations. Rising global prices may temporarily limit local demand, while declines encourage purchases.

The value-added tax on jewelry (15%) plays a role in determining consumer preferences, making investment bars more attractive than jewelry during periods of rising prices.

Global and regional gold markets are witnessing rapid developments, the most notable of which include:

- Ongoing geopolitical crises in various parts of the world (North Korea, Eastern Europe, the Middle East).
- Market expectations for a reduction in US interest rates in 2025 by about 40 basis points, supporting gold.
- Slowdown in some major economies like Japan, prompting investors to hedge.
- New taxes and fees imposed in some markets affecting trading activity.

In the Saudi market, gold movements remain linked to global developments, with a secondary impact from local seasons and tax policies. Markets continue to monitor central bank statements and major economic events to forecast price trends.

Anyone interested in gold in Saudi Arabia should understand that local prices closely follow the global market. The role of local investors or buyers is to stay updated on global news, US Federal Reserve decisions, and monitor movements in the dollar market.

Some investors prefer to buy during seasonal declines (for example, after interest rate hikes or the release of positive global economic data), while others avoid purchasing during peak periods. However, it is important to emphasize that investing in gold does not yield periodic returns; rather, it is considered a tool for hedging or protection against inflation and market volatility.

It is always advisable to consult a licensed financial advisor before making financial or investment decisions regarding gold or any other commodity.