Gold's continued rise on world markets has impacted the gold jewellery trade in the UAE, triggering a drop in demand from gold-loving consumers, a former World Gold Council (WGC) official said on Thursday.
Rolf Schneebeli, former WGC head, said the current high price has prompted consumers to hold back and wait for better deals. However there are signs investor demand remains robust and that prices will drop in the short term.
"This is again the ‘mood of the souq', when clients wait to buy at a lower price. The investors' demand for gold continues to be strong in bars and coins as a trend," Schneebeli told Gulf News.
Gold prices propelled to an all-time high of $1,300 (Dh4,774) a troy ounce last week. As the prices of the precious metal are quoted in US dollars, to which the UAE dirham is pegged, any price movement on world markets also impacts the domestic trade. Besides, given the strong link of jewellery and bullion rates, price changes will also apply to jewellery.
"The price increase will continue on a trend basis. However, in the short term, one could expect a price correction on the downside. This could well be a short-term dip of $50 per ounce, which is a buying opportunity for long-term investors as well as speculators," said Schneebeli.
"The good thing is that the price increase so far has been rather controlled and continuous. While certain people talk of a potential bubble in the precious metals sector, this seems not yet imminent as we constantly see new highs followed by a new base building on a high level," he said.
As a result of higher gold prices, the UAE market is now more likely to favour other forms of jewellery, including silver and stone sets.
"The substitution effect will continue. We will see more sales in stone set and silver jewellery, which is a challenge to the jewellers who have to venture more and more into less familiar product categories," said Schneebeli.
As far as investors are concerned, their preferred assets these days are Swiss francs, yen and gold. All of these had a strong run in the short term, but are also considered to be the best protection against looming inflation.
