Gold is too hot to touch for shoppers. Dubai gold price will now inch closer to the Dh200 a gram mark. Image Credit: Reuters

Dubai: The price of gold briefly shot past $1,700 an ounce early on Monday for the first time since 2012, as investors rushed to pick up the metal as the best asset to hold in extremely difficult times for the global economy.

But through the rest of the morning, the surge was kept in check. Gold is now at $1,662-$1,653 levels, but $1,700 is already starting to feel like it's going to be part of the new normal.

Gold was expected to breach $1,700 this year - but most analysts and traders were expecting this to happen only towards the end of this year. For the price to touch $1,700 in March itself is way too early - and that includes shoppers.

After trading briefly at $1,702, it is now at $1,698. For the UAE’s gold and jewellery trade, it adds to the worries they have had since the start of the year. “When gold went past $1,600 earlier in the year - touching its highest point since 2013 - that was the first shock,” said Cyriac Varghese, General Manager at Sky Jewellery. “Now to deal with $1,700 just weeks later - I don’t think shoppers are prepared for that.”

Optimists will say gold is still some way off from the $1,900 an ounce plus of 2011, which was the all-time high for the metal. But as Varghese says, UAE shoppers are unlikely to see a silver lining in the current levels.

The rupee's decline is going to be a huge problem - expat Indians are far more likely to send their funds back rather than buy gold jewellery

- Abdulsalam K.P. of Malabar Gold & Diamonds

Dubai price

The Dubai Gold Rate is at Dh190.50, and could be in for a major revision at 9am today, when the first of the four daily retail rates is announced. Plus there is the 5 per cent VAT per gram. 

The Dubai Gold Souq has always been a magnet for shoppers, whether from within the country or those on a visit. But the virus outbreak has led to drops in tourist buying, say retailers. Image Credit: Gulf News Archive

"Gold trade in the UAE is having to deal with three issues at the same time - a drop in tourist-led buying because of the coronavirus scare, the fall in the Indian rupee, and now, gold going past $1,700," said Abdulsalam K.P., Executive Director at Malabar Gold & Diamonds and board member of Dubai Gold and Jewellery Group.

"The rupee's decline is going to be a huge problem - expat Indians are far more likely to send their funds back rather than buy gold jewellery. Historically, that's always been the case - a weak rupee always spells trouble for gold."

What next?

"Global investors continue to show an insatiable demand for all things bullion ( ETF paper, scrap, bars, and coins), which is running tangentially to both the increase in Covid-19 (coronavirus) cases and the anticipated negative economic and financial market impact," said Stephen Innes, Chief Market Strategist at AxiCorp..

"Over the past 48 hours, gold has received support, which has contributed to a surge in "fear-driven" investment demand."

For UAE jewellery retailers and shoppers, it all translates into more bad news.

Bullion is one of the standout winners from the outbreak, with Goldman Sachs Group Inc. saying the commodity "has immunity to the virus".

- Stephen Innes at AxiCorp