Dubai: UAE shoppers engaged in heavy gold and jewellery buying since July 1 as prices hovered in the $1,798-$1,808 an ounce range. The sales recorded during these 72 hours is the second best this year, just behind that recorded during the Indian festival of ‘Akshaya Trithiya’ on May 3.
The price drop happened at a most opportune time for residents, coming as it did just ahead of their holiday travel. The other factor that pushed demand was India announcing a 5 per cent hike in gold import duty and which widened the price difference between UAE and India gold prices to around 15 per cent.
Typically, gold and jewellery sales in Dubai alone average about 200 kilos a day of 22K. “On Akshaya Trithiya this year, that shot up to between 800 kilos to 1 tonne, and these last three days, overall Dubai sales would have been about 500-600 kilos daily,” said Abdul Salam K. P., Vice-Chairman at Malabar Gold & Diamonds. “Jewellery was what shoppers were interested in, with gold bars and coins not having much traction. A lot of the buying as made with an eye on what they could get for the same in their home countries.”
- Abdul Salam K. P. Vice-Chairman of Malabar Gold & Diamonds
In the last 12 months, the lowest that the Dubai Gold Rate has been was on September 30, when it was at Dh197 a gram for 22K. Currently, the local gold rate is at Dh206.25. In this period, prices have shot up into the Dh220 and over range too after the start of the Russia-Ukraine conflict.
Gold sales could have been even better were it not for the heavy remittances UAE residents engaged in at the start of the month, with key Asian currencies at or near all-time lows against the dollar.
Will gold’s softness last?
Another US interest rate hike is coming this month, and which will likely further firm up the dollar. Typically, that means gold softening, but last month’s rate hike actually saw gold hold firm. It was only from mid-week last that the softening happened. Even then when many shoppers were hoping gold would keep dropping to $1,790/oz or lower, it actually started heading higher. Early on Monday, gold is at the $1,811 level.
“Gold and oil still look set for increases rather than short-term declines,” said an analyst. “With gold, there will be lots of tactical buying by consumers each time they are sure that a good sized drop has happened.”
India’s sudden move
On Friday, India announced a 5 per cent hike on gold imports, and which pushes up the difference between retail gold prices in the UAE and India to around 15 per cent from 8-10 per cent. That extra difference will work out to a huge advantage for UAE jewellery retailers.
“Going forward, there will be more of India’s wedding jewellery purchases happening in the UAE in addition to the regular tourist buys,” said a jeweller. “If the hike in import duty was done by the Indian government to reduce domestic consumption, it will not work. Indians will keep buying gold – and where possible they will buy in the UAE.”
Already, a significant portion of jewellery buying for the Indian wedding season happens at jewellery showrooms and boutiques here, as well as other shopping requirements. If gold prices remain under $1,825/oz, expect a significant increase in such buying over the next few weeks.