UAE’s gold jewellery demand hits 20-year low

It could have been worse if not for a strong showing in fourth quarter of 2017

Even a late December surge in buying was not enough to add sparkle to the UAE’s gold jewellery sales last year.

In fact, overall jewellery volumes dropped for a fourth straight year, totalling 42.8 tonnes as opposed to the 43.4 tonnes gold retailers managed to sell in 2016.

This is the lowest retail volumes for jewellery in the UAE in the last 20 years.

Saudi Arabia remained the biggest market for gold jewellery in the Gulf region, accounting for 45.7 tonnes (down from 49.4 tonnes), according to the latest figures from the London-based World Gold Council (WGC). Among Middle East markets, only Iran came out with strong demand, up 12 per cent to 45.4 tonnes.

In fact, much of the demand spike in the UAE happened during a six-day stretch from December 26, when DSF 2018 opened and shoppers used the opportunity to buy up gold ahead of the January 1 deadline for VAT to come into effect.

As for the rest of 2017, there were phases when demand picked up despite being unable to sustain the run beyond a few days.

The firming up in bullion prices too had a role in shading gold’s glitter among shoppers.

To put matters in context, the overall 2017 tally for UAE jewellery demand could have been much worse if not for the 16 per cent year-on-year gain during the final three months.

India factor

Overall global demand for jewellery weighed in at 2,135.5 tonnes (up from 2016’s 2,053.6 tonnes), helped along by improved offtake in India (up 12 per cent to 562.7 tonnes) and China (at 646.9 tonnes and a gain of 3 per cent), based on WGC estimates.

India’s jewellery offtake seems to be getting back into some shape after an exceptionally difficult run from November 2016, when demonetisation vaporised demand for a couple of months, only to be followed by the Goods and Service Tax (GST), which became effective from July 1, 2017.

On the whole, global jewellery demand ended 2017 in positive territory.

Interestingly, this was the first time since 2013 that sales recorded a year-on-year gain.

But overall demand took a bit of a dent in 2017, coming in at 4,071.7 tonnes and lower by 7 per cent from a year before.

The main cause for the dip was the lack of buying support from exchange-traded funds (ETFs) in the US, with investors there intent on topping up their exposures to already over-valued stocks rather than spread their risks.