Stock Dubai Gold
Wedding related shopping and tourists were driving Dubai's gold and jewellery sales in December. And the same is happening in the first days of 2023. Image Credit: Ahmed Ramzan/Gulf News

Dubai: Gold prices are dropping – but have they done enough to get UAE’s shoppers started on making their first purchases of 2023?

On Thursday (January 5), the UAE gold rate slipped to Dh205.75 a gram for 22K from Dh208.5 a day earlier, but resident shoppers are likely waiting to see whether the drop continues and could yet touch Dh200 a gram or lower. Because as has been clear from buying trends in 2022, the Dh190-Dh200 range has been the sweet spot for UAE consumers to engage in more gold buying.

Early Friday (January 6), bullion prices are again under pressure, down to $1,840 an ounce after a near $15 drop. This could reflect marginally on the overnight UAE gold rate when today’s first price is set after 8 am.

Even then, there are two categories still picking up gold in the UAE – tourists (and there are plenty of them) and those stocking up for weddings. “What we have seen – based on the VAT refunds – is that average tourist spend on gold has been Dh6,000, with the biggest purchases coming from Indian visitors in the last few days/weeks,” said Shamlal Ahamed, Managing Director of International Operations at Malabar Gold & Diamonds. “That’s a significant amount and even with international gold prices at $1,850 levels since the start of the year.

read more

In December, the Dubai/UAE gold and jewellery market saw extensive buying for NRI weddings – this will continue this month too, again irrespective of current price levels.

- Shamlal Ahamed of Malabar Gold & Diamonds

Where is gold headed?

That depends on whether there is a global recession in the offing. If a recession happens, gold is up for another increase, with analysts suggesting that $1,900 an ounce could be a target level. This week, the highest point gold had climbed to was $1,862.

“Gold’s up due to expectations that the US interest rate hike cycle will soon taper off and rates may actually start getting reduced at some point of time in 2023,” said a Dubai-based consultant for the bullion industry. “As either recession or slower US/global economic growth kicks in.

“Since gold has a negative correlation with interest rate movements, it has gone higher in the last few days.”

So, UAE-based shoppers and investors have to watch out for all signals that point to a recession sometime soon. In the last one, gold went all the way up to $1,920 plus levels in 2011.

Gold’s 5-year shine

Gold is again the one asset that’s been shining through the first week of the year, with stocks still volatile and crypto yet to show any signs of picking itself up from current levels.

Compared to the last five years, the current UAE gold rate is a 30 per cent plus increase (it was Dh146 a gram for 22K back in January 2019 and Dh172.5 in January 2020). Last year same time, gold was at Dh208.25 and in 2021, at Dh216.

“From an investment perspective, gold’s made quite a good deal of progress from 2019 and is holding its own compared to 2021-22,” said an analyst. “What shoppers in the UAE should be doing is wait for those opportunities when gold slips to around Dh200. It may not happen that frequently in 2023 – it’s looking like that kind of year.”

Gold prices weren’t ready for a trip to $1,900 and investors quickly locked in profits yields rose and the dollar staged a comeback. Gold is struggling as the latest round of (US) economic data suggests the Fed will have a lot of pressure on them to tighten further

- Edward Moya, Senor Market Analyst at Oanda