STOCK Dubai gold shopping
UAE's jewellery demand has staged a recovery from the all-time lows in 2020. But high gold prices remain a concern. Image Credit: Virendra Saklani/Gulf News

Dubai: It could be another year before gold and jewellery buying in the UAE returns anywhere close to pre-pandemic levels, according to senior industry sources, who cite the lack of Indian and Saudi visitors as the main reason.

Since March 2020, demand for gold in Dubai’s Gold Souq and other jewellery shopping destinations in the UAE was primarily driven by resident shoppers. With COVID-19 still imposing limits on flights and road trips, buying remains subdued, with jewellery sales in the second quarter well below the five-year average, according to the latest numbers from London-based World Gold Council.

Pre-COVID-19, tourist buying made up around 30-40 per cent of gold and jewellery sales in the UAE. Anil Dhanak of Kanz Jewels says the return of tourists from India and the Subcontinent will need time to rebuild, as well as of Saudi shoppers. “Their return will not happen overnight – vaccinations will need to do their bit to make flying a far easier experience than it is now in most countries,” said Dhanak.

“This is why everyone is hesitant about making forecasts about when UAE gold demand will return to pre-Covid times. Even shopping by UAE residents is not that encouraging – every other household has had to deal with unexpected medical bills and other expenses. That need always depresses consumer sentiments, especially on jewellery purchases.”

The gold price averaged $1,816.5 during the second quarter, which is incidentally what it is quoting at today (July 29).

Anil Dhanak
Anil Dhanak of Kanz Jewels: "The tourist-shopper will have to return for a full-scale revival of gold demand in the UAE." Image Credit: Gulf News

A bit of dazzle

But some improvements are still there. After selling a combined 5.1 tonnes of jewellery in the second and third quarters of 2020, this year, between April to end June, UAE sales were at 7.3 tonnes, according to World Gold Council. But in the January to March phase, sales totalled 8.3 tonnes.

The five-year quarterly average for jewellery demand in the UAE is 8.8 tonnes. “We saw improvements in [local] demand because of the economic recovery,” said Krishan Gopaul, Senior Analyst for EMEA markets at WGC.

Stock-Krishan-Gopaul
“We still see question marks over inflation and over global economic recovery. There are still challenges and the potential for further disruption with new Covid variants.” - Krishnan Gopaul Image Credit: Supplied

It could have been better had not gold prices stuck to $1,800 an ounce plus levels for much of the first six months of 2021. Each time, prices slipped below that point, the weakening did not continue for long, as institutional investors kept piling back in given gold’s status as the safe haven asset to be. So, whenever worries about global economic recovery, COVID-19 second or third waves and higher upcoming inflation cropped up, gold was always the winner.

Though not from a shopper’s perspective. The Dubai Gold Rate has held on the Dh200 a gram and over range. On Thursday morning, the Rate for 22K is Dh204.25.

4%


Gold price increased by this percentage during Q2-2021, following a 10% decline in Q1-2021.

Comfort in bars and coins

The second quarter showed UAE shoppers continue hoarding gold bars and coins whenever prices moved to levels they were comfortable with. In the first six months, 3.7 tonnes of gold were bought this way, whereas in the whole of 2020, it was at 5.2 tonnes, according to WGC data.

If prices stick to $1,800 an ounce/Dh200 a gram plus range, expect more bar and coin demand. (In the UAE, gold bars are exempt from VAT.)

Global demand

If India didn’t have to deal with the second COVID-19 wave, the second quarter tally for global gold and jewellery could have been better. Even then, the final total of 390.7 tonnes of jewellery bought worldwide is still 60 per cent higher than for the same period in 2020.

As for gold’s prospects in the second-half of this year, “We still see question marks over inflation and over global economic recovery,” said Gopaul.”There are still challenges and the potential for further disruption with new Covid variants.”

Clearly, what will drive shopper sentiments for gold will not be decided on prices alone.