Gold: Should UAE shoppers book now, pay later for Eid after Dh11/gm increase in 10 days?

Dubai: The gold price rush continues, with less than $20 separating the asset from reaching $2,300 an ounce for the very first time. It was just over 10 days ago that gold had hit the $2,200 mark, again for the first time.

Gold price movements have been such that sudden daily spikes are showing up with more frequency. In these two weeks or so, there have been more than one day where bullion gains have crossed $20 and over, and even going past $40. All of which have been the fuel for the safe haven asset to now be within striking distance of the $2,300 an ounce mark. (One troy ounce equals 31 grams.)

Typically, when price gains turn this hot, gold shoppers tend to sit it out until it cools off. But the coming days are all about Eid shopping and gifting, and in the UAE one of the busiest phases for gold shopping over decades.

Will shoppers turn up this time? Jewellery retailers are extending the book now, buy later option to potential shoppers. This way, they are protected from further price increases. Of course, with the added incentive that they will get the lower price at the time of buying if gold slips off these peaks.

UAE gold rate

In UAE gold rate terms, Dh235 a gram was the highest point the 22K version had reached. This was in March 2022, and happened immediately after the Rusia-Ukraine crisis erupted. Since March 21, 2023, the UAE gold rate has swept aside all previous highs - it closed April 2 at Dh254.25 a gram. This is an increase of more than Dh11 in the last 10 days. 

But shoppers remain unsure whether booking now is the best option available to them. “When gold is already at current highs, I’m not sure whether booking will help,” said a shopper who’s been waiting for more than 2 months for prices to stabilize. Or even drop once more to around $2,000 levels.

“The way prices are going up by $20-$40 on average each week, in UAE gold rate terms, that’s an increase of Dh2-Dh4 grams. Even if I book, the cost to buy is still way too high.

“Booking makes sense only if there is a reasonable chance of gold prices stabilizing or even dropping.”

Can gold drop soon enough?

Analysts are not sure a drop will happen before the barrier of $2,300 is crossed. Such has been the momentum push behind the metal this time.

“Most likely, it looks like the upward trend will continue,” said Vijay Valecha, Chief Investment Officer at Century Financial. “Gold prices could go even higher this week.”

Which directly impacts on UAE shoppers’ plans to do their round of gold buying ahead of Eid. Many had actually put off their plans until this week after the price shot up to $2,200 plus by Friday last.

Corrections will happen - but when?

This version of the gold price rush can't continue, not at the pace it's been setting so far. A correction will happen, but once it does, what shoppers and jewellers will look for is how much it will drop. In the past, such corrections have ranged between $50-$100 on an ounce basis. (So, if the levels had hit $1,900, the correction would have taken it closer to $1,800-$1,850 levels.)

This time, even a $100 correction will only provide partial relief for shoppers. "From around $2,300 level to $2,200 is still too high for a shopper who has been so used to $1,800-1,900 for much of the last 4 years," said a jeweller. "Shoppers everywhere need to reset what they think an ideal price should be."