Highlights
- Still waiting for gold to cost a lot less? Analysts say you might end up disappointed, with the precious metal set to regain its shine in the next few months
- Consumers in UAE could end up paying Dh10 or more per gram the next time they hit the shops, based on the latest price forecast
- The global market price for gold is set to hit $1,300 an ounce in March 2019 and climb higher to $1,400 an ounce by end of next year
Dubai: After declining this year, gold is set to stage major rallies in 2019, with prices forecast to touch more than $1,300 an ounce.
That means today's selling rate of just a little over Dh150 per gram for 24-karat gold could jump to more than Dh160 per gram, and consumers in the UAE could be shelling out Dh300 more on buying a 30-gram piece.
“We expect higher gold prices in 2019,” said the latest analysis from ABN Amro. The Dutch bank with headquarters in Amsterdam has predicted that gold could touch $1,300 an ounce by March 2019 and $1,400 an ounce by the end of next year.
"Prices could come as high as $1,340 or even higher in the next year, which is approximately Dh162 per gram for 24K. The trade wars tensions coupled with growing interest rates should correspond to higher gold and silver prices going forward," Vijay Valecha of Century Financial told Gulf News.
How gold has fared so far this year
The past several months have been quite unproductive for the precious metal, with prices dropping by close to 5 per cent so far since January. In the UAE, residents have had the chance to stock up on 24K jewellery at prices lower than Dh150 per gram.
A huge part of the UAE’s population are expatriates from Asia who have a penchant for buying gold coins, bars and jewellery either as gifts or investment. With the introduction of the value-added tax (VAT), however, consumer spending on gold has slowed down so far this year despite the price declines.
At the beginning of the year, UAE’s retailers already reported less stellar sales performance. Shops reported that their average daily sale of gold pieces dropped by half, from two to three kilos to 500 grams to one kilo.
And those who are still holding off purchases and waiting for more price relief aren’t likely to have their expectations met.
Why gold isn't getting cheaper
Consumers are set to spend more out of their pockets to acquire new jewellery pieces next year, with the US dollar now showing signs of weakness, the Chinese yuan set to recover and there’s less concern about China or the country’s trade war with the US. All these factors provide a perfect environment for gold to regain its luster.
Georgette Boele, the bank’s coordinator for FX and precious metals strategy, noted that a major factor that will push the costs higher for the end consumer is the recovery of the yuan in China, a major consumer of gold.
The Asian currency has weakened by around 10 per cent against the US dollar since April and sparked concerns among investors. “When China allows the yuan to decline, investors become concerned about the state of the Chinese economy. As a result, they are also more negative about the outlook for gold demand,” Boele wrote.
However, Chinese authorities have already taken steps to stimulate the economy and protect itself against the negative impact from US import tariffs. “We expect that the Chinese yuan will recover in 2019. This should calm investors and improve investor sentiment towards gold.”
For Karim Merchant, group CEO and managing director of Pure gold Group, the precious metal will likely go anywhere between $1,200 and $1,300 for most of next year, unless there is a “significant change in global political or economic situation.”
“As the US economy comes off the stimulus effect from tax cuts begins to slow down, the dollar could weaken which will have a bullish effect on gold. The decision of [the US Federal Reserve] on interest rates, the China-US trade war, overall global political situation, oil prices and US dollar value all play a significant role in determining gold prices,” he said.
Are people in UAE still buying gold?
Boele cautioned that higher prices could further dampen demand for gold.
The World Gold Council reported that gold shopping in certain markets is already starting to slow down despite the price declines.
Demand for jewellery in the UAE and Saudi Arabia dropped by 24 per cent and 10 per cent, respectively, in the second quarter of the year, as consumers turned away from the shops due to the introduction of tax.
“[Jewellery demand] suffered due to the impact of VAT,” the World Gold Council said. Gold buying in Saudi Arabia alone has halved in the last three years. “The continued push for localization – favouring domestic employees over expat workers – has also undermined demand, given that many of the latter are Indians with ingrained gold-buying habits.”
