Stock UAE Gold
UAE shoppers seem in the mood to make some last minute purchases of gold before prices really start to move up. Chances are that gold is heading back to $1,800 and over. Image Credit: Ahmed Ramzan/Gulf News

Dubai: Even as prices rise, demand for gold in the UAE is recording some improved demand – and jewellers are thanking the holiday plans that residents are making for this month.

Indian expats flying back are fuelling much of this sudden and renewed interest in gold buying, jewellery retailers say. The same demand patterns are emerging, albeit on a lower scale, from other South Asian expats in the UAE with plans for a holiday break either now or later this month.

And why? “There seem to be more UAE residents heading for a holiday back home at this time of the year – and that’s the only reason why gold sales are picking up even with UAE gold rate back at over Dh200 a gram for 22K,” said a retailer. “Not many retailers saw it coming because gold is now more than Dh10 a gram higher than what it was during late October.

“Many UAE residents are buying because they can then sell at a much higher price in their own country during their holiday.” (Gold buying in India at the retail level is on average 15 per cent higher than in the UAE. Plus, there are also the currency gains that Indian expats here get to make when buying here and selling in India.)

This is one of the peak phases for gold buying in India, coinciding as it does with the wedding season, which runs through end February/early March. “Everyone realises that gold’s value is the one thing that lasts,” said Anil Dhanak, Managing Director at Kanz Jewels. “I keep telling anyone that why spend Rs500,000 on a wedding suit that they never end up wearing on any other occasion. The same with most luxury items – it’s only the odd Hermes handbag that gets pricier even after a sale.

“So, why not keep investing in gold?”

And gold is rising again

The short-term forecast is for gold prices rising further. Today (December 1), bullion is at $1,781 an ounce level, a clear break on the mid-$1,750s it had been through recent days. Now that the US Federal Reserve has stated a preference for lower rate hikes than the 0.75 per cent each on the last four occasions, gold could well end up breaking $1,800 all over again. (Because a weaker dollar is always a positive for gold’s upward mobility.)

Kanz Jewels
"Nothing lasts like gold - and I'm talking just about its price," says Anil Dhanak of Kanz Jewels. "We can expect a bit of smart buying before gold becomes too costly all over again, based on what the US Fed has been saying of late.) Image Credit: Supplied

Tourists could chip in

In the days after gold prices from around Dh185 a gram late October, tourist spending on the metal in the UAE had declined. In the coming days, there could be a return of interest as the UAE welcomes more visitors for the end-of-year peak activity.

“Gold at Dh200/Dh205 a gram could still be seen as a relative bargain by overseas shoppers, benefitting as they do from the VAT payback,” said a retailer. “And current gold prices are a bargain given where it was in the December of 2020 and 2021. And gold looks set for another push to $1,800.”

If the US Federal Reserve weighs in with more talk of change on their rate hike policy, gold sure can.

How will gold prices fare? An analyst's view
'Gold bulls were particularly happy with Powell's comments on Wednesday with the yellow metal rallying strongly to trade at the upper end of its recent range. It faces strong resistance around $1,780 though which was a significant level of support in the first half of the year. With so much data to come over the next day or so, it may not prove particularly resilient if traders are given further hope that rates will rise more slowly and peak lower...'

- Craig Erlam, Senior Market Analyst at Oanda