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Gold prices hit new peaks in Q4-23 and was ruling at well over $2,000 an ounce levels. This is why gold buyers went in for a change of strategy - with more gold bars and coins. Image Credit: Shutterstock
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Dubai: Investors in the UAE seemed to have two strategies in play during 2023 – buy property or invest in gold. Or do both.

While investments into UAE property through 2023 hit multiple highs, those into gold – in the form of bars and coins – shot to a 10-year high and reinforcing its status as one of the best ‘safe haven’ assets to have around, according to new World Gold Council data. 

More so at a time when gold is firmly settled in at $2,000 an ounce plus levels. (Prices were at $2,033 early Wednesday (January 31).)

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Bars and coins

In the UAE, gold bar and coin demand totalled 11 tonnes, making up a substantial 34 per cent increase from 2022, according to the latest gold industry update from World Gold Council. Interestingly, one of the highest demand from UAE investors was seen during Q4-23, when prices of bullion had shot to new highs of $2,100 plus an ounce. And also a period when gold was holding up at well over $2,000 levels.

We feel now would be such a time as all predictions are for higher gold prices in 2024.

- Abdul Salam K. P. of Malabar Gold & Diamonds

And there could be even more gold buyers waiting for a suitable price to enter. “Some investors have been holding off until now awaiting a correction,” said Andrew Naylor, Head of Middle East markets and Public Policy at WGC.

The next 24-28 hours will be crucial for gold investors, with the US Federal Reserve meeting set offer some clarity on when they might start cutting interest rates again. Whatever the decision, some of it will stick on gold and where it would be trending in the coming weeks.

What about jewellery?

Not too surprising, WGC estimates that UAE gold jewellery demand dropped 15 per cent during 2023. Much of that decline came during the final three months of the year, usually a peak buying phase for the yellow metal at gold and jewellery stores across the UAE. In Dubai, the recently concluded DSF did manage to generate sufficient demand for gold despite the peak prices.

“Again, a lot of the buying was of bars and coins and also of basic necklaces and bangles,” said a jewellery retailer in Dubai. “Even the wealthy shoppers – residents and tourists – are showing an inclination to pick up more gold bars and coins.

“It’s because they feel they can still get the best returns from taking gold in this form.” (In the UAE, buying a gold bar comes without VAT charges, while gold coins do.)

With such factors playing out, ‘Gold keeps getting attracting investments from being the safe haven...

- Andrew Naylor of WGC

Overall gold jewellery sales in the UAE during 2023 was at 39.7 tonnes, against 46.9 tonnes in 2022, according to WGC. (To keep things in perspective, there was a period during Q4-22 when gold prices had dropped to $1,620 plus levels during late October and early November. That also coincided with the India festivals of Diwali and Dhanteras, and a peak sales period for gold and jewellery shopping.)

When will UAE shoppers pick up gold jewellery again?
Jewellery buyers in the UAE and elsewhere always take a pause while prices are up. But once they feel gold prices will sustain and is not a short-term volatility, they will start buying again. We feel now would be such a time as all predictions are for higher gold prices in 2024.

- Abdul Salam K. P., Vice-Chairman of Malabar Gold & Diamonds

What’s next for gold prices?

A decisive moment will happen later today, when the US Fed has its say about what next for interest rates. That could then be the cue for other central banks to ease up on their high prevailing interest rates.

But these days gold prices are having to deal with another factor – the ‘geopolitical premium’, as Naylor says it. That obviously has to do with the situation in the Middle East, further exacerbated by the Red Sea crisis and attacks on US bases in Iraq and Syria.

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"I would rather invest into real estate and reap the benefits of a steady rental income, besides the capital appreciation.” - Joseph Chettiar with his wife Twinkle.

With such factors playing out, ‘Gold keeps getting attracting investments from being the safe haven,” said Naylor. “Having said that, prices weren’t able to sustain the $2,100 levels for the better part of Q4-23 despite all that was happening geopolitically.” (There was a brief phase when gold hit its highest point of $2,135, in December, but that was a relatively brief phase.)

So, should shoppers and investors tune their minds to $2,000 plus being the new normal for gold? Or will the US Fed help bring about some price drop?

Whatever be the case, buying gold today compared to a year ago is costlier by $104 on an ounce basis.

“I have been considering diversifying my investment portfolio. We accumulated gold thanks to our parents leaving us something. We have two boys, so there is really little need for a lot of gold in the family. I would rather invest into real estate and reap the benefits of a steady rental income, besides the capital appreciation,” says Dubai-resident Joseph Chettiar.

“With the steady population growth in Dubai, property will always be in demand. My wife Twinkle and I are also looking at upgrading our home and moving into a bigger villa. We cannot wait for the Fed rate cuts to buy our dream home.”

- Anjana Kumar, Senior Reporter