Since July 6, the Dubai Gold Rate has been under Dh200 a gram, whereas as recently as July 2 it had been quoting at Dh206.25. Image Credit: Bloomberg

Dubai: This week UAE residents were celebrating Eid Al Adha, and buying gold as shoppers decided a price below Dh200 a gram for the 22K variety was the right moment. The Dubai Gold Rate is at Dh198.25, a slight gain on the Dh197.75 on July 8.

“The price increase from Friday convinced many shoppers not to wait around thinking gold is likely to drop further,” said a jewellery retailer. “This has been the best week for gold shopping in the UAE for some time, and today (July 10) will be just as strong, because no one wants to be in a position where they delay and gold prices again start gaining from tomorrow when the international metals market opens.

“Gold yet again reinforces two concepts - that it’s the best investment asset when its prices start dropping. And two, it remains the safest bet during inflation and recession.”

Since July 6, the Dubai Gold Rate has been under Dh200 a gram, whereas as recently as July 2 it had been quoting at Dh206.25.

Flurry of gold buying

Since last Tuesday, shoppers in the UAE have been diverting their funds meant for remittances, maxing out their credit cards, dipping into their savings, and even selling a few stocks on the capital markets to pick up a few grams of gold. The big UAE jewellery retailers have also been seeing heavy online enquiries and even sales happen, as out-of-town residents make their bookings and purchases.

Will gold drop further?

Some analysts had been talking of gold slipping to $1,650 an ounce from the current $1,740 levels. But inflationary worries remain rife across the world, and the US Federal Reserve is lining up another sizeable interest rate hike. If the dollar gains further, gold could come under further stress. Yet, there’s no guarantee this would be the outcome. The US and EU have been talking about limiting Russian gold available to the markets, and how this plays out is another factor for the medium-term.

The ‘buy’ mentality

UAE shoppers are not distracted by what’s in store for the dollar and how high the US rate hike will be. Their sole focus this week has been to keep buying as much as their budgets allow. As has been clear to jewellery retailers, any time the price comes below Dh200 a gram, it is the signal to buy. Through this year, gold had until now not dropped below Dh200.

Also, in this period, during March, it has broken through the $2,000 an ounce mark, which pushed the Dubai Gold Rate to Dh234 a gram for 22K, the second time it had done so in two years.

“Gold price movements had been too volatile in recent months, and which is why shoppers were intent on using the drop to under Dh200/gm to good effect,” said a retailer.

Some shoppers, at the same time, are willing to wait before cashing in. They want to see whether gold could indeed fall further as some of the predictions suggest. But rather than take an outright risk, these shoppers will make the booking now and make their purchase in one- or two months through deals with the retailers. If gold does drop further than, say, today’s Dh198.25, they will get the lower price. They remain locked into today’s rate if prices move higher over the coming weeks.

What will next week bring?

Further volatility on pricing is a given as the clock ticks towards the next Fed meeting and the inevitable rate increase. The consensus seems to be that another 0.75 per cent increase is what’s ahead. If gold prices slip, will it be a sudden dive towards $1,680 levels and then further down?

UAE gold shoppers will be waiting and watching - and for those who have used up all available funds in this week’s purchases, there’s always the next monthly salary credit coming.