Market Watch: Gold traders await holiday season

Retail traders in the gold market here are pinning their hopes for recovery on holiday purchases by Asians after suffering from poor sales in the last quarter. The uncertainty in the region following the Iraq war and high gold prices had a negative impact on the local market.

However, activity has just begun to pick up and the market is expected to regain its shine soon. The wholesale trade is also beginning to pick up, with several wholesalers changing tack to give the market a boost.

"The rush has started and the market is busy as one can see the crowds. June and July are traditionally the high sales months in Abu Dhabi's gold souq where expatriate Asians buy gold before leaving on vacation," said Tushar Patni, chairman of the informal Abu Dhabi Gold and Jewellery Group.

"In fact, most traders were waiting for this month after seeing flat sales in the last couple of months," he added.

Although retail sales remain slow, they are better than expected. Most traders said sales were down around 25 per cent against the 40 per cent that was expected. "We are not happy with the sales, but it could have been worse. Fortunately, it is better than what we expected," said a medium-sized 22-carat gold trader.

"Just as consumers are getting used to high prices, we traders are getting used to the ups and downs in our business. We need to do something more aggressive like promotions, something different to push sales," he added.

Raj Soni, managing director of Indian Jewellers, agreed that holiday purchases have revived the dormant market but this is for the short term. "We know the market trends here, and in August and September it will again become slow. Later, it picks up due to demand during the festival season in late October and November."

According to Patni, the wholesale trade has also picked up along with the pick-up in retail sales. "Wholesalers have become liberal in their terms with retailers. They make supplies without demanding payment up front."

But as one wholesale trader said, they are still cautious when it comes to credit. "Some may be less cautious to push stocks, but with uncertainty in the market, it would only be prudent to be cautious."

Consumers, meanwhile, are getting used to the high price of gold. With current prices likely to prevail for some time, buyers are not dissuaded. "Ten years ago the price was the same and gold is essential buying especially for Asians. This trend will continue even now," said Patni, a view endorsed by others.

Current prices hover around Dh40 per gram for 22 carat gold and Dh42 for 24 carat gold, exclusive of fabrication charges.

The old gold souk which was gutted by fire earlier this year is likely to be demolished and many outlets there have relocated either to the Madinat Zayed Gold Centre or other locations. And, for the time being, the Abu Dhabi Gold and Jewellery Group is dormant with no promotions planned.

Rates in Capital:
Current prices hover around Dh40 per gram for 22 carat and Dh42 for 24 carat, exclusive of making charges