Stock - Gold
With gold prices under pressure, July has turned to be the best month for jewellery sales in the UAE, hitting daily averages of '200-300 per cent higher' than in the first-half of 2022. Image Credit: Clint Egbert/Gulf News

Dubai: After dropping to $1,682 an ounce, gold prices suddenly reverse course, adding nearly $30 in less than 30 minutes, leaving shoppers in the UAE who had plans to buy over the weekend with a bit of disappointment.

The sharp increase in prices came immediately after the European central bank announced a higher than expected interest rate hike amidst more worries for the global economy. Plus, the US reported higher job losses.

All of which would have played a part in the sudden rush in gold prices.

Earlier in the day, at $1,682 an ounce, gold prices are now at their lowest point since June 2020, opening up new buying options for shoppers in the UAE. The Dubai Gold Rate is currently at Dh191.75 a gram for 22K and down from yesterday's Dh194.50.

By Thursday evening, gold was back at $1,700 levels, as global markets took in the higher than expected ECB interest rate hike.

Gold had been holding at around $1,710/oz levels for the last three days, and it seemed that dropping under $1,700 was meeting with resistance. But early Thursday (July 21), it finally slipped to $1,689 levels, and raising the prospect of a further dip.

Analysts have been talking about gold sliding to $1,650.

Another sales rush?

In the first 10 days of July, shoppers in the UAE are estimated to have bought around 1 tonne of gold and jewellery as prices dipped below Dh200 a gram for the first time this year. In Dubai alone, average daily sales is said to have touched 500-600 kilograms during the same period, which is ‘200-300 per cent’ higher than during the first six months.

“The June sales boost happened because there were a lot of UAE residents from India and Pakistan heading for their holidays, and they were taking gold along,” said Shamlal Ahmed, Director of International Operations at Malabar Gold & Diamonds. “And then India raised import duty for gold by 5 per cent, which effectively created a gap of 15-18 per cent between gold prices here and in India.

A third reason was gold under Dh200/gm convinced a lot of Arab expats in the UAE to do some serious gold buying.

- Shamlal Ahmed, Director of International Operations at Malabar Gold & Diamonds

Wait until August

A lot of shoppers have also postponed their buying to August, but having made the booking when local gold rates first dropped under Dh200/gm for 22K. “Many UAE residents will have returned from their holidays and with their July salaries should be making a few gold buys,” said a retailer. “But for tourists, we will need to wait until September – everyone’s hoping gold will continue at these levels until then.”

What next for bullion?

If shoppers had their way, gold prices will remain under constant pressure and push its way below $1,650 in the short-term. Is that likely?

Ultimately, prices will go up, it's only temporarily being kept down by speculators for their own needs. Which is why gold shoppers can keep benefiting from sub Dh200/gm for now.

- Anil Dhanak, Managing Director at Kanz