Dubai: After enduring a tough two weeks of subdued demand brought on by sudden gold price volatility, Dubai’s jewellery trade is hoping that sales over the coming two days can offer some compensation. To sweeten the deal, the closing date for the mega draw — where prizes totalling 40 kilograms of gold can be won — has been extended to February 7 instead of the earlier scheduled February 2. (The daily gold raffle draws spread over 32 days of DSF 2015 has already concluded.) “The extension offers a chance for more potential buyers to participate in the mega draw and the size of the prizes on offer should certainly be an incentive,” said K.P. Abdul Salam, Treasurer on the board of Dubai Gold & Jewellery Group and Executive Director at Malabar Gold & Diamonds. “While the first 10 days of DSF 2015 were exceptionally strong, demand tailed off after local gold prices shot up towards the Dh150 a gram mark. Consumers had been comfortable with levels of Dh140 a gram for some time and when that changed suddenly, it showed up in the reluctance to buy.
“The third week of DSF 2015 was the toughest ever experienced by the local gold trade during recent DSF promotions, and demand had slipped by around 15 per cent [week-on-week].”
According to Ramesh Kalyanaraman, Executive Director at Kalyan Jewellers, “There was a bit of an up-and-down cycle in terms of consumer demand since January, and which sort of got magnified because there were fewer sales made to tourists. In our particular case, nearly 80 per cent of sales clocked during this period were to domestic consumers.”
According to market sources, that would be the same for most of the leading jewellery retailers in the city. But it does represent a break from the recent past when the sales split has tended to average around 70 per cent in favour of local shoppers and the rest made up by tourist purchases.
World economy
Gold’s spike, of course, had to do with global investment funds once again ploughing into the yellow metal as a hedge against a new round of uncertainties facing the world economy as well as the continued weakness exhibited by oil prices. But for consumers and the jewellery trade alike, gold’s gains came at a most inopportune time. DSF represents one of the three key sales cycles for the trade in a year, and is also the period when jewellers target a wider shopper base because of the higher percentage of tourists in Dubai at the time.
“For a $100 [Dh367] increase in less than a week was certainly not expected and it immediately set off the inverse relation between demand for gold and its pricing,” said Chirag Vora, Director of Bafleh Jewellery and Joint Treasurer at Dubai Gold & Jewellery Group. “For the trade and the consumer alike, it’s always best when prices are rangebound.
“It did create a bit of a fall in demand during this DSF cycle ... but going forward the market will be comfortable with a level of $1,200-$1,300 an ounce. What it wouldn’t want to see are sharp rises and falls.”
Still, for the duration of this year’s DSF, the gold trade expects to be in the positive when the final numbers are toted up. Salam forecasts a growth in overall sales for the sector of around 10-15 per cent, which would “not be bad”.
“Volumes made in the first 10 days should ensure that Dubai’s retail gold trade will clear last year’s performance — in fact all of 2014 was a sparkling year for gold volumes,” said Salam. “Even during November and December, when most Dubai residents hold off buying to wait for DSF in January, there were good numbers.
“If the next 48 hours prove just as strong as the first 10 days, it can still make for a strong start to this year.”
