Gold Bars
Even gold bars and coins were not spared as shoppers maintained a distance from purchases. Image Credit: AFP

Dubai: Global gold jewellery demand has dropped to its worst level… even lower than the fall it sustained in the initial months of 2009’s Global Financial Crisis. Rocketing prices and a complete halt on retail activity meant that the “jewellery sector was hit hardest,” according to a top official at London-based World Gold Council.

In the first three months of 2020, worldwide demand came to 325.8 tonnes – and that’s 39 per cent lower from the same period a year ago. The decline in India was by 41 per cent and China’s by 65 per cent – when the world’s top two gold consuming nations take such a hit, jewellery didn’t have much of a chance.

But Q1-2020’s total comes in way below what got sold in the first three months of 2009, when the Great Recession swept through the global economy. In Q1-2009, 351 tonnes were sold, according to the WGC.

“It’s the worst quarter for jewellery in the modern era,” said John Mulligan, Head of Member and Investor Relations at WGC. “Demand is driven by several factors – consumer confidence, expectation of discretionary spending powers, and to some extent, expectation of future income levels.

“All were hit hard by the virus… and then you had the physical reality of the lockdown.”

What of the UAE?

The numbers for UAE’s jewellery demand in the first three months gives mixed signals. In all, 9.5 tonnes were sold, and that’s down 11 per cent from a year ago.

But when compared to Q3-2019 (5.4 tonnes sold) and Q4-2019 (8.6 tonnes sold), the 9.5 tonnes between January and end March are a significant improvement. In fact, the 9.5 tonnes come across as a significant improvement.

This happened despite the near absence of tourist buying from late January onwards, as countries started to cut down on passenger flights. So, clearly, before the shops were closed late March, there was quite a bit of buying led by UAE-based shoppers, even as prices started pushing past $1,600 levels. Much of the buying could have happened in January, during the DSF promotions.

And makes for whether the Q1-2020 numbers should be seen as a “half-full” or “half-empty” perspective.

Glitter fade

This week, jewllery stores in the UAE have opened, but keeping to the strict guidelines on the number of shoppers allowed within them at any one time. Demand has yet to pick up, with gold at $1,711 an ounce. The Dubai Gold Rate is Dh194 for 22K.

“In the immediate future, I forecast a pause in growth,” said Anil Dhanak, Managing Director at Kanz Jewels. “There will be a drop in customers and we expect around one-year's time to get back to the normal situation.

“On the factory side, we have given an annual vacation to the majority of the staff as demand is quite low. According to social distancing guidelines and health regulations, we also reduced our retail staff as well to ensure best health practices are followed.”

Strain of COVID-19

That gold retail markets will feel the impact of the pandemic for the full-year is now seen as a certainty. With economies feeling the strain and jobs at risk everywhere, even regular gold jewellery buyers will find it difficult to show up at the stores.

According to Louise Street, Market Intelligence at the World Gold Council, “Demand will continue to feel the effects of COVID-19 for the rest of 2020. Consumer-focused sectors of the market have suffered drastically.”

But favoured by others

Away from the jewellery shops, gold is on a high these days – in the last 12 months, prices are up 35 per cent, and that’s because funds and central banks are stacking up their holdings of the metal.

“Gold ETFs (exchange traded funds) buying of gold in March was 151 tonnes and April’s are almost comparable,” said Mulligan. “That’s truly remarkable. There have been no major sell-offs by these funds for now. Any sell-offs have only played out as a minor tremor – nothing more.”

Through the first three months, gold ETFs attracted inflows 298 tonnes and pushed their global holdings in these products to a “new record high of 3,185 tonnes”.

  1. Total Q1-2020 demand for gold was up 1% to 1,083.8 tonnes. The coronavirus outbreak, which swept the globe during the first quarter, was the single biggest factor influencing gold demand," says World Gold Council.
  2. Jewellery demand was "particularly hard hit" by the virus outbreak - quarterly demand dropped 39% year-on-year to a record low of 325.8 tonnes.
  3. Central banks continued to buy gold in "significant quantities", but at a slower pace than in Q1-2019. Net purchases totalled 145 tonnes (down 8 per cent year-on-year).