Emirati gold rush pumps-in a staggering Dh10 billion, calms as prices traced higher
Dubai: The UAE’s version of the gold rush could have pumped in a staggering Dh10 billion plus through the wholesale and retail bullion and jewellery trade in April.
It was set off by a buying and selling frenzy in the 10 days from the afternoon of April 11, when gold prices took a dive, and saw volumes of gold touch 2-2.5 tonnes a day against the average of 1-1.5 tonnes a day in more sedate times.
Volumes have since settled down to normal levels in the first few days of May as gold prices traced higher.
Gold closed at $1,470.75 an ounce on Sunday. But the jewellery trade believes there is another spurt of buying at the retail level starting from last weekend and lasting all the way to May 13 — the traditional Indian gold buying period of Akshaya Trithiya — and a few days thereafter. Tourists to the UAE are also joining in.
“Even if funds or central banks were to dispose off their bullion assets, gold is one commodity where the lower prices go there is a corresponding surge in retail buying,” said Shamlal Ahmad, director of international operations at Malabar Gold. “Conservative estimates place the overall volumes, both retail and wholesale, in April here at more than 50 tonnes — there is no shrinking in the appetite for the metal.”
During the 10-day period of extreme volatility, there was a marked increase in the number of buyers who sought out gold coins and bars for their asset portfolios. Market estimates place this percentage as up to 30 per cent of the transactions that were done at local gold stores last month. This is against the average of 5-8 per cent otherwise.
Even on the institutional side, there has been support for the metal. “The regional gold market has seen strong surges of institutional buying for investment purpose during the last couple of weeks due to the price drop,” said Tarek Al Mdaka, managing director at Kaloti Jewellery Group. “There is still good demand, especially for smaller gold bars and we expect supplies to return to pre-crash levels by next weekâ¦ if there are no unexpected price movements.”
Retailers confirm that concerns over supplies have eased up considerably and premiums for confirmed orders have softened. These premiums had touched $10 an ounce at the height of the demand cycle. For Akshaya Trithiya, jewellery chains are leaving out no strategy to get the customer to come in and seal a purchase. Campaigns include a price lock-in on the gold value for advance orders, 25-kilo raffles and waiver of making charges on gold coins. The latter gameplan targets shoppers who would prefer to make small-ticket purchases.
In less volatile times, the month of Akshaya Trithiya represents the second best volumes for the trade after the promotion-heavy phase during DSF. “The majority who buy gold and jewellery during Akshaya Tritiya do so for auspicious reasons and we are sure the price volatility will not affect demand during this period,” said John Paul Joy, executive director at Joyalukkas Group. “Yes, there will be pressure on margins, however I guess the volumes will help maintain — and maybe even better — the bottom-line.”