High prices may take shine off Abu Dhabi gold trade

Abu Dhabi: Abu Dhabi's gold trade ended 2005 with increased turnover but if current high prices soar higher prospects look dim, traders said.

"Overall, last year was better than 2004 which for several reasons was bad for us in Abu Dhabi. But in 2005 business improved with sales rising by at least 20 to 30 per cent on average," said Tushar Patni, Chairman of the Abu Dhabi Gold and Jewellery Group.

"The Eid festival sales early this month were an encouraging start but after that sales have slowed because of high prices," he said.

Some 85 retailers form Abu Dhabi's gold trade divided between the Hamdan Street and Madinat Zayed Shopping Centre. Wholesale trade is not active in the capital.

Ups and downs

Traders said sales saw the seasonal ups and downs and despite the spurt in prices during the fourth quarter, business ended at a healthy level.

"There were high sales during the usual peak seasons and flat sales during some months. However, I can say 2005 was better than 2004 and our revenues and profits were at least 20 per cent higher," said the manager of Alukkas Jewellery which has two outlets in the capital. "We cannot say about 2006. The prices are really high and consumers may make only essential purchases."

The retail price of 22 karat gold has hovered around Dh665 per 10 grams that translates to Dh 65 per gram. Prices closed at Dh672.50 per 10 grams in the UAE yesterday. But Patni said the current price of gold is normal when compared to other commodities such as oil or even stocks and currencies.

"Just like all other commodities, gold prices have also shot up and it is not a worrying factor. Sooner or later consumers will get used to this price range." The Abu Dhabi grouping of gold traders plans to meet next month to discuss plans for launching promotions. There were no promotions in 2005.

New consumer trends in the capital indicate a marked preference for designer and branded jewellery irrespective of the price. Moreover, there is a lot of reverse sales from consumers to retailers due to the high prices.

"This happens whenever prices shoot up and with the current high prices, many people are selling gold bars and jewellery as well to take advantage of the prices."

Customers at a store on Hamdan Street in Abu Dhabi. Shoppers 'will get used to the high prices sooner or later,' according to one trader.