Stock markets have crashed... and gold prices too are dropping. It is now trading at below $1,500 an ounce. Image Credit: Bloomberg

Dubai: The price of gold in Dubai is at its lowest point in 2020 — at Dh171.75 a gram for 22K.

The previous highest point was Dh172.5 a gram on January 1.

The current price level is more than Dh18/gram down from the peak, at Dh190.5 on March 7 and 8.

Gold jewellery retailers in the UAE are now hoping this would encourage some buying activity... or at least get shoppers to “lock in” rates for their next purchase.

Leading jewellers are running campaigns where shoppers can put up 5-10 per cent as down payment and then make the purchase closer to “Akshaya Trithiya”, which falls on April 26.

The day is rated as a special one by Indians to buy gold, and has traditionally been a high point for gold and jewellery sales in the UAE.

This year, retailers and shoppers were concerned that sky-high gold prices - it was at over $1,700 an ounce just last week - would impact on buying for this year’s Akshaya Trithiya. In a good year, sales on or during the celebration account for around 5 per cent of total gold sales in the UAE, as per some estimates.

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The 'Akshaya Trithiya' next month will be a make or break moment for the UAE's gold trade. This year, the Indian festival will be celebrated on April 26. File picture of a Kanz outlet in Bur Dubai.

Book and then relax

“Booking locks in the gold price on that particular day and protects shoppers against any further increases,” said Abdulsalam K.P., Executive Director at Malabar Gold & Diamonds, which is offering a 10 per cent down payment scheme until next month. “Even if prices were to drop below the locked in value, shoppers will still get the lowest price.

“On average, the bulk of the Akshaya Trithiya buying averages around Dh3,000-Dh4,000 per ticket. The Dubai/UAE gold market needs to see some good numbers this year after six extremely difficult months.”

Dip below $1,500

For a brief period on Monday (March 16), gold fell below $1,500 an ounce, for the first time this year. It had started January 1 at $1,518 and within days shot past $1,600, and then earlier this month broke the $1,700 barrier - a level that it last touched in 2012.

That did come as a surprise because global stock markets recording full-on crashes, gold was seen as the ultimate hedge in troubled times. As recently as a week ago, analysts were talking about even 1,800 an ounce as possible in the coming weeks. So, for gold to trade at under $1,500 represents quite a climb down.

So, should gold retailers start hedging themselves against any big swings in gold prices? Anil Dhanak, Managing Director at Kanz Jewels, is nonchalant about volatility. "The best hedge is what I hold as gold inventory in my stores," he said. "Gold prices are not like stocks - it's not paper value. It's something much more than that. It's why shoppers will stick pick it up - whether prices are high or low. Only the grams differ."

Gold prices are not like stocks - it's not paper value

- Anil Dhanak of Kanz Jewels

So, will gold stay put?

No one in the business expects gold prices to be nice and steady. The longer the coronavirus spread continues, the greater the possibility of the global economy dropping to its lowest point since 2009. Gold could soon pick up investor appetite - those led by funds and central banks - and go back to ever higher levels.

Cyriac Varghese, General Manager at Sky Jewellery, said: “In all this volatility, retail gold buyers can be assured of one thing - the price of this asset is not going into a dive. The problem is that this makes buying these days a much more expensive proposition.”

He throws up some numbers - the highest gold reached in Dubai last year was Dh175.5 a gram, which was on August 29. The lowest was the Dh145 on May 21.

In other words, gold price today - the lowest this year - is still a good Dh26 a gram more expensive than the lowest point last year. Amidst all this uncertainty, a price lock-in scheme offers shoppers some respite.

“People respond well to the scheme - but the biggest threat to demand has nothing to do with the prices... and everything to do with the coronavirus.”