Volatile gold fails to dent jewellery sales
Precious yellow metal price outlook is uncertain due to geopolitical tensions
As the gold prices are expected to remain volatile in near future due to geopolitical tensions and uncertain global economy, leading UAE jeweller groups are confident of good sales growth during the summer season.
The major industry players told Khaleej Times that the jewellery sales remained unaffected despite volatility in gold prices as buyers repose trust in the precious yellow metal as an instrument of safe haven asset.
Shamlal Ahamed, managing director (MD) for international operations at Malabar Gold and Diamonds, said many factors, including geopolitical tensions and general economic outlook, among others, have an impact on the gold rate.
“As long as the ongoing geopolitical risks linger, the gold rate will continue to stay volatile. However, gold will be a safe investment and desirable asset for investors this year, too,” Ahamed said.
He weighed in on the impact of the volatility of prices on jewellery sales in the first quarter and considered it to be negligible as buyers are, at best, putting off their purchases till the rise eases.
However, the recent gold price drop is expected to create a strong demand because of recent festivities such as Akshaya Tritiya and Eid Al Fitr.
“Since the Covid-19 pandemic situation has normalised and restrictions have been lifted, we’re expecting most of the residents to travel home for summer vacations. And gold is the most sought-after commodity ahead of their annual vacation, both as a value-appreciating gift for their loved ones and as a safe haven asset. We’re expecting robust sales of jewellery during the summer vacation holidays,” Ahamed added.
Gold prices Drop AGAIN
Gold fell more than one per cent to its lowest in three-andhalf months on Monday as elevated bond yields and overall strength in the dollar dampened bullion demand, even as riskier assets dropped after grim China economic data.
Spot gold dropped 0.2 per cent to $1,807.64 per ounce as of 13:11 GMT (5:11pm UAE time) after earlier hitting its lowest since January 31 at $1,786.60 (Dh6,562.18). The US gold futures were little changed at $1,808.10 (Dh6,641.1) per ounce.
“Spot gold may not stray far from $1,800 (Dh6,611.40), suppressed by the might of the king dollar and elevated treasury yields, while supported by the looming prospects of a recession,” said Han Tan, chief market analyst at Exinity.
Gold prices are down over 13 per cent since scaling a nearrecord peak of $2,069.89 (Dh7,602.71) an ounce in March. A stronger dollar makes gold expensive for overseas buyers, while higher treasury yields raise the opportunity cost of holding zero-yield bullion.
DEMAND For Gold will Go up
John Paul Alukkas, MD for international operations at Joyalukkas Group, said gold price is expected to go up in the coming months on account of various factors, including the Russiaukraine conflict.
“While this may cause a slowdown in gold purchase, we feel that the upcoming festive and wedding seasons will fuel more demand for gold. Besides, customers aren’t that finicky about the price fluctuations,” he said.
He said volatility always has an impact on gold jewellery, but Dubai Shopping Festival and Valentine Day celebrations kept up the sales momentum during the first quarter (Q1) of this year that ended on March 31. He said people are getting ready to travel out of the UAE and are expected to make purchases that normally happen before the holiday season.
Good RIDE so FAR
Chirag Vora, director at Bafleh Jewellers, said gold prices have had a good ride year-to-date because of the Russia-ukraine crisis.
“I think the prices are likely to remain volatile throughout this year with some fluctuations depending on geopolitical tensions and increase in (US) Federal Reserve rates,” Vora told Khaleej Times.
He said gold still is one of the leading safe haven assets, despite volatility in its prices.
“When the gold price increases, the demand for gold bars and coins rises and also lower prices lead to an uptick in demand for gold jewellery. The trend appears to be that the volume of gold jewellery sales will be steady through this year on the lines of Q1,” he said.
He answered in the affirmative that gold jewellery sales would pick up ahead of the summer vacation as “travel restrictions ease after the raging Covid-19 pandemic played havoc for the past two years”.
UNCERTAIN outlook
As long as the ongoing geopolitical risks linger, the gold rate will continue to stay volatile. However, gold will be a safe investment and desirable asset for investors this year, too,” Shamlal Ahamad, managing director for international operations at Malabar Gold and Diamonds
Anil Dhanak, MD at Kanz Jewels, said gold price outlook is uncertain in the medium to long term due to geopolitical tensions.
“As we have seen in the past few days the gold prices have eased off as the (US) dollar has gained strength while the Federal Reserve works to increase rates steadily. In the shorter term this dip in gold prices may continue and for the medium to longer term the price of gold is a lot more uncertain as geopolitical factors are playing a major role this year. The geopolitical tensions in Ukraine will continue to influence the price of all commodities including gold,” Dhanak told Khaleej Times.
“Given the nature of the economic and political scenario all over the world in the past few years, there has been a greater volatility of gold prices which customers have now come to expect. It’s for this reason, we’re seeing customers continuing to buy jewellery with higher gold prices as well as expecting a drop in a volatile market situation is less certain,” he said.
In general, he said Q2 and Q3 are considered less busy times of the year for the gold industry as summer is at its peak and tourism has slowed down.
“We’re expecting something different to happen this year, as travel restrictions are almost fully lifted and there is still plenty of pent-up demand,” he said.