STOCK Dubai gold shopping
They are back... Shoppers in the UAE have been heading back to jewellery stores in recent days as gold finally drops below $1,900 an ounce levels. While jewellery sales are yet to recover, demand for coins and bars have shot up significantly. Image Credit: Antonin Kelian Kallouche/Gulf News

Dubai: UAE’s shoppers are once again picking up gold – but more as coins and bars for investments rather than jewellery. With gold finally dropping below $1,900 an ounce – it’s at $1,878 early today (October 29) – shoppers want to stock up on a few grams before prices return to their volatile ways.

What’s interesting this time is while families are yet to return to buying, it’s the individual shopper who is interested in the coins and bars, and relatively low-value jewellery. These are essentially purchases done with an eye on a quick disposal in their own countries. (For instance, there is currently a Dh30 plus difference on the price of one gram between Dubai and India prices.)

Shoppers will be hoping that further price volatility won’t happen between now and November 14, which is when the Indian festival of ‘Diwali’ is celebrated this year and traditionally a peak period for gold purchases. Retailers are now reasonably confident that some demand pick up will happen even this year as shoppers shrug off the pandemic blues, worries about their job situation, and the fact that as recently as August, gold zoomed to an all-time high of $2,070 an ounce.

This time, it’s not just about festive buying. “We notice there are lots who are buying from an investment perspective - for them this is the right time,” said Joy Alukkas, Chairman of the retail network that bears his name. “And Diwali is the time to buy.”

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Is the worst over?

UAE’s gold and jewellery sector could do with some boost in demand… and sentiments. The latest World Gold Council (WGC) findings say that jewellery demand in the UAE was down 30 per cent in the first nine months from a year ago, with sales between July to end September making up a dismal 3.8 tonnes. But that’s still a vast improvement on the 1.3 tonnes that shoppers picked up between April to June, a period that coincided with the closure of commercial activity in Dubai to combat the COVID-19 spread.

For a gauge of how much demand had dropped, one just needs to look at the first quarter sales estimates – 9.5 tonnes.

“There are certain signs of recovery and, clearly, demand is not as weak as in the second quarter,” said John Mulligan, Director of Member and Market Relations at London-headquartered WGC. “Gold has already lost out on quite a few Indian festival-related buying this year. Plus, there were fewer “auspicious days” for gold buying this year (as per the Indian calendar).”

Which all adds to the need for retailers to maximise buying opportunities this Diwali.

Pandemic or not and whether there is price fluctuation and market volatility, people will certainly buy gold during Diwali

- Joy Alukkas of Joyalukkas Group

Combine the efforts

The Dubai Gold & Jewellery Group is doing its bit by extending “support to all retailers to launch Diwali campaigns without any financial burden placed on them in terms of mandatory fees,” said Cyriac Varghese, General Manager at Sky Jewellery. “Although retailers are running their own promotions, this gives ample flexibility for all retailers to run some value-added offers for shoppers, who have had so many distractions related to COVID-19 and their job circumstances. The Gold & Jewellery Group has made a timely gesture to the trade.”

Global demand

In the first nine months, jewellery sales the world over dropped to below 1,000 tonnes… and the lowest since 2009 when the financial crisis was at its peak. Compare this with the 1,652 tonne average during the January-to-September period during 2010-19, according to the World Gold Council. This year’s tally, in comparison, was 904 tonnes, and only managed that because Chinese shoppers made a return to buying with some of their usual zeal.

But that’s not how it is in India, the world’s second largest market for gold. Jewellery sales were down 48 per cent in the third quarter, and the COVID-19 infection rates, lockdowns and gold prices that went past Rs50,000 for 10 grams, were only part of the reasons.

Weighing on consumer minds were the “inauspicious periods of Pitru-Paksha and Adhik Maas”, which “discouraged buying during September,” according to the WGC.

Dubai Gold 3
Gold coins are a hot ticket with shoppers in the UAE these days as they look for assets that can hold their own even in pandemic times. Plus, there's no VAT on coin sales. Image Credit: Virendra Saklani/Gulf News

Stocking up on coins, bars

Global demand for these investments shot up by 49 per cent between July and September, as gold showed it was the only asset that was holding its own as economic forecasts turned dire. Investors in India, China and Turkey were leading the way in getting their hands on coins and bars, and the trend was helped by even their peers in Europe.

“When the constraints on consumers being able to go out were relaxed, one would have expected far greater investor demand,” said Mulligan. “That’s what we are seeing happen with bars and coins. We are seeing retail consumers and private investors back in the market… where they can.

“That’s obviously the main difference between the jewellery market and what you are seeing happen with bars and coins.”

Broader economic vulnerabilities that were present in the market even before the pandemic were driving investors to gold – that was already driving investors to gold. It will continue, even exacerbate, during the pandemic.

- John Mulligan of World Gold Council