Stock - Gold / Gold shopping / Gold jewellery
During the third quarter 2023, when gold prices kept to $1,900/oz levels, UAE shoppers were buying less of jewellery. But their offtake of gold bars and coins held up quite well. Image Credit: AFP

Dubai: Even as prices soared, UAE shoppers are still finding ways to buy gold when possible – even if that means switching from jewellery. During the July to September phase, shoppers were picking up gold bars and coins as investments and only going for jewellery when prices turned favourable (even if they lasted just days).

This week, gold again shot past the $2,000 an ounce mark. Currently, it’s around the $1,994 range – the brief respite that gold shoppers had in the first week of October seems like a distant memory. On October 5, gold had dropped to its lowest point of $1,815 since March, and then shot up immediately after the start of the Israel-Gaza conflict.

Price was the principal factor that saw UAE jewellery demand drop around 15 per cent during the third quarter, a period when gold kept to $1,900 an ounce levels for the better part, according to the latest World Gold Council data.

In the last 12 months, gold prices are higher by around $350 on an ounce basis. This makes for a compelling investment case, which explains why many UAE shoppers thought of changing their preferences.

Gold bar (which do not carry the 5 per cent VAT) and coin demand held up nicely. “This demand was predominantly led by UAE resident shoppers,” said Andrew Naylor, WGC’s Head of Middle East and Public Policy operations. “And clearly, the high local gold prices were the reason why jewellery demand slipped during the period.”

There’s a certain choppiness in demand that could continue. A clear sighting of what’s next will come after this week’s meetings of the US Federal Reserve and the BOE to decide on interest rates.

- Andrew Naylor

Clearly, this marks quite a shift from how UAE consumers are getting into gold. The June-July phase is one of the high seasons for gold buying, especially for those expat residents returning to their home countries for the summer holidays. This year, they used quite a bit of that spending on gold as an investment in the form of bars and coins rather than straight jewellery. Thereby saving on making costs.

Considering the ongoing conflict in the Middle East as well as inflation in US markets, we are expecting the gold price to experience an upward trend. As per forecasts, gold could hit $2,050 in the near future.

- Shamlal Ahamed
Price lock ins are helping with gold
The price increase further indicates the value-appreciating nature of gold as an investment. A large portion of our customers took advantage of our 'Gold Rate Protection' to lock in the price when it had bottomed out (early October). Through this, they block the rate for future purchases by paying a 10% advance, valid until November 12.

This offer has helped shoppers looking to buy jewellery as part of the festive season without having to worry about price fluctuations."

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

A 15% drop

In the final tally, UAE jewellery demand during July to September dropped 15 per cent to 9 tonnes. In the year to end September, jewellery sales were lower by 19 per cent from a year ago, according to WGC, to total 29 tonnes (against 36 tonnes).

“There’s a certain choppiness in demand that could continue,” said Naylor. “A clear sighting of what’s next will come after this week’s meetings of the US Federal Reserve and by the Bank of England to decide on interest rates.”

According to WGC data, India was the only market that actually saw jewllery sales put in some growth during Q3-23, helped by festival buying and consumer bullishness about the growth trajectory the country’s economy is having. Even then, gold bar and coin demand proved to be on the higher side.

“India’s outlook for the remainder of the year is healthy, although with an element of caution,” the World Gold Council notes. “The seasonal boostin festive and wedding purchases should help release pent up demand, particularly after a relatively weak H1.

“But if the sharply higher prices of early Q4 persist demand may be constrained.”