Dubai: Gold shoppers in the UAE (and elsewhere) have gotten their best break in 2 months, with prices dropping below $2,000 an ounce and setting up the possibility of some fairly good demand at jewellery stores.
Gold is trading at $1,992 an ounce currently after a near $30 drop over the last 12 hours, and industry analysts and retailers are expecting it push lower, and even reach $1,950 levels. The yellow metal had been at well over $2,000 levels since mid-December, consolidating its status as a safe haven all through.
The UAE gold rate slipped by Dh1.25 to Dh223.5 a gram for 22K, tracking global bullion price movements.
Now, the time has come for ‘some corrections to start,” said Shamlal Ahamed, Managing Director for International Operations at Malabar Gold & Diamonds. “The market was aware of the possibility of gold prices dropping after the sharp rise in the dollar (index).
“We do expect some sizeable shopper activity to resume in the coming days. Everyone will be hoping to see some more price drops happen in this phase.”
How’s UAE gold rate faring
Currently at Dh224.75 a gram for 22K, local retail price of the metal should see some softening when the first rate setting is done at 9am. In the last 10 days, the UAE gold rate’s highest point had been Dh228.75. (For updates on UAE gold rates, please track Gulf News' gold price updates.)
We do expect some sizeable shopper activity to resume in the coming days. Everyone will be hoping to see some more price drops happen in this phase.
The price drop over the last few hours is enough for a Valentine’s Day demand rush, say retailers. “There will still be a few Valentine’s Day purchases to be made today, and some of that could well go into buying gold jewellery,” said a retailer, who remains hopeful that dropping below the psychological barrier of $2,000 will be enough of a prompt for shoppers.
“After 2 months of high gold rates, shoppers will be relieved to get some look in at more comfortable rates.”
Indian tourists
There could be another opportunity for gold retailers to cash in – the presence of significant numbers of Indian tourists, who are here for the new temple opening in Abu Dhabi today.
Despite no direct influence on gold rates, the surge in visitors could lead to increased consumer spending and activity in other areas.
"While the drop in gold prices below $2,000 may not directly correlate with the influx of visitors to the UAE - for the temple opening in Abu Dhabi and Gulfood event in Dubai - it would still help local businesses and retail sectors," said Anil Dhanak, Managing Director of Kanz Jewels. "Despite no direct influence on gold rates, the surge in visitors could lead to increased consumer spending and activity in other areas."
Bus loads of potential shoppers
“Even before the price drops started to happen, we could see full bus loads of Indian tourists arriving in Dubai Gold Souq and the Meena Bazaar locations,” said Ahamed. “A significant majority of them will have bought gold, at whatever price because of the differential they get compared to the India retail price.
“So, the price drop of today is a major bonus.”
The simplest reason is that there is no clarity when the US and other key global markets will see the first interest rate cuts. The latest US inflation data suggests the Fed will not be in any rush to make those rate cuts.
When the data came out on inflation, gold along with other commodities such as silver and platinum saw value dips. The US stock markets too took a hit.
"Until the first cut is delivered, the market may at times run ahead of itself, in the process building up rate cut expectations to levels that leave prices vulnerable to a correction," said Ole Hansen, Head of Commodity Strategy, Saxo Bank.
"With that in mind, the short-term direction of gold and silver will continue to be dictated by incoming economic data and their impact on the dollar, yields and not least rate cut expectations."
Until the first cut is delivered, the market may at times run ahead of itself, in the process building up rate cut expectations to levels that leave prices vulnerable to a correction.
Not easy making price forecasts
Over these three years, predicting gold's price trajectory has become a difficult exercise. Each time there was a softening to levels seen as being shopper-friendly, prices would soon rebound. Even then, the last months have been particularly difficult for shoppers as it stuck to well above the $2,000 levels.
It is essential to conduct thorough research, assess risks, and seek professional guidance before making any investment decisions.
"Predicting the gold market is challenging due to the presence of both upward and downward potential factors," said Vikas Lakhwani, Chief Revenue Officer, CPT Markets. "Key developments to monitor include future inflation reports, US Federal Reserve policy pronouncements, and geopolitical events, as they can significantly influence the price of gold.
"It is essential to conduct thorough research, assess risks, and seek professional guidance before making any investment decisions."
Or for that matter, even when it comes to buying gold jewellery...
