Demand freeze for yellow metal?: UAE’s gold trade hit as prices soar
DEMAND FREEZES AS PRICES OF 22K GAIN MORE THAN DH10 A GRAM IN LESS THAN A MONTH
Even promotions are not helping UAE’s gold jewellery retailers as they once used to. With shoppers staying away, third-quarter sales are likely to end up anywhere between 8-15 per cent lower than in recent years. Some market sources believe it could end up even lower.
Blame gold prices for this complete lack of demand, with the official Dubai gold rate at Dh171.75 for a gram of 22K. And if global market circumstances change further, it could even push all the way to Dh180 and over, market sources worry.
“Jewellery retailers can waive off making charges, offer gold exchange schemes and free coins — but when there is a more than Dh10 a gram difference between July and this month, no one can waive that off,” said Cyriac Varghese, General Manager at Sky Jewellery. “The third quarter is typically the lowest point for gold buying... but this year, it has dropped by a further 15 per cent or so.”
According to Abdul Salam K.P., Executive Director at Malabar Gold and Diamonds, the drop in demand is one of worst in recent times.
“Last year same time, prices were in the range of Dh140 a gram or so, and there was reasonable demand at those levels,” Salam, who is also on the board of Dubai Gold & Jewellery Group, said. “From those
levels to now, the decline would be in the 20-25 per cent range. It’s proving to be a bad time for gold in the UAE.”
A defining week
This could well be a make or break week for gold, the outcome of which will have a significant say on whether UAE gold shoppers are willing to commit.
Everything hinges on what one man — Jerome Powell, the US Federal Reserve chief — may have to say at the annual bankers’ summit in Wyoming, USA.
If he signals more US interest rate cuts, when the Fed meets
This could well be a make or break week for gold, and it depends on what US Fed chief says at his annual bankers’ summit at Wyoming.
late next month, then gold is in for another ride — a not so merry one for shoppers — on the higher side.
“When that happens, international bullion prices will be pulled to $1,600-$1,650 an ounce, and at those levels, local rates would cross $180 a gram,” said Salam. (For the record, the highest point for Dubai gold rate was Dh204 a gram back in 2011, when bullion was at $1,923 an ounce.)
Jewellery retailers have lots to fret about than just the poor demand. Last month, a midsized retailer went bust, with money owed estimated at over Dh300 million. That others could be feeling the same pinch is never far away.
The market is abuzz about a big name in the precious metals trade facing an uncertain future. “We are keeping fingers crossed
This being the height of summer, there are not many tourists lending support by buying gold and jewellery. This despite them being able to receive full VAT refunds on all such purchases.
“There are a few visitors from India, but so far we have not seen much demand coming from them,” said Abdul Salam K.P. of Malabar Gold and Diamonds. “I guess the high price is getting to them as well, and also contributing in its own way to making things more difficult for the sector.”