Gold Demand in UAE May Rise Despite Exponential Surge in Yellow Metal Prices

Published August 28th, 2019 - 06:35 GMT
Gold prices sustained an upward trend in past few weeks.
Gold prices sustained an upward trend in past few weeks. (Shutterstock)

Gold jewellers are optimistic about brisk sales activity despite an exponential surge in yellow metal prices in past few weeks as they said demand will pick up once the festive season begins next month.
 


Leading jewellers and experts said rising price is irrelevant for some of the consumers as they will purchase gold jewellery because of religious grounds [Diwali or Christmas] or social obligations such as weddings, birthdays and anniversaries. However, most of the buyers adopt wait-and-see policy to closely monitor price trend and make a decision when prices will come down.

"Recent price hike of gold has an immediate effect on the market. This is the highest price gold recorded in past 7 years," Abdul Salam KP, group executive director, Malabar Group, said.

Gold prices sustained an upward trend in past few weeks and surpassed the $1,550 per ounce mark for the first time in more than 6 years on Monday due to the US-China trade war, geopolitical tensions in the region and slowdown in global economy. The metal had hit its highest level since April 2013 at $1,554.56 on Monday and then eased to $1,529.81 per ounce on Tuesday.

"Consumers always take a 'wait-and-see approach on the price variations of such magnitude. They normally watch the movement for the next few days, and if the trend continues or price set, they take purchase decisions," Salam said.

Market leaders said the current price increase gives lot of confidence to gold buyers internationally in general and GCC in particular. Currently, the 24k gold is quoting at around Dh185 per gramme as against Dh144.75 in corresponding period of last year while 22k gold climbed to Dh170 from Dh136 in same period last year. So Gold is poised to emerge as safe haven as investors are currently interested to book profits at high prices.

"We are sure that the customer confidence in gold will bring back customers to the market soon and will show a good growth in sales in the coming weeks," added Salam.

Tourism to drive demand

Karim Merchant, chief executive and managing director, Pure Gold, shared the similar views and said the UAE government is actively promoting tourism to countries like China and India, who have a strong appetite for gold jewellery.

"With the hike in gold import prices, Indian tourists will prefer to buy from the UAE," Merchat said.

"Due to stringent measures followed by Dubai municipality, the jewellery in Dubai is known for its purity and high quality of craftsmanship which will appeal to the tourists," he added.

Even though gold prices are at a high, driven by USA-China trade war and lowering of interest rates by Federal Reserve, he said jewellery sales during the upcoming festival season are expected to be stable.

"Customers can also choose to buy low-weight gold jewellery. For those who prefer diamond jewellery, the UAE has the latest designs of certified diamond jewellery," added Merchant.

Festive season

Joyalukkas Group, which is busy planning its campaign for Diwali in October, is optimistic that sales may be same this year during this festival.

"We have witnessed a marginal upward trend this year. Our Eid sales volumes went up by approximately 5 per cent as compared to last year and looking at the current festive market sentiment, we are hoping to see the same pattern during Diwali this year," Joy Alukkas, chairman and managing director, Joyalukkas Group, said.

He cautioned that gold prices are going up, which may impact sales. "Diwali is time when people buy for auspicious reasons so we feel may see similar demand compared to the past years. Also the price difference from India will also encourage Indian tourists to purchase while they are holidaying here," he said.

It may be noted that in Dubai alone welcomed 997,000 Indian visitors during January-June 2019 period and this number will swell in next quarter given the preparation of Expo 2020 Dubai moving in full swing and this may bode well for jewellery sales as after festive season comes the popular.

Alukkas points out that innovation, marketing and special offers and promotions play a key role in boosting sales.

"We hope the gold prices will be steady in the next couple of months and the gold lovers will not have to keep away from their much loved precious metal."

Chirag Vora, director, Bafleh Jewellery, said the jewellery sales have been slightly lukewarm, but "we are optimistic about coming festival seasons" in last quarter.

"We are even planning new promotions to maximise the sales," he said.

"We feel that the appeal of gold remains and continues growing during festivals as it is considered to be auspicious to buy gold during this time. We believe in providing the best price to our clients regardless of the season or festival," said Anil Dhanak, MD, Kanz Jewels.

By Sandhya D'Mello


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