Gold lovers in the UAE continued to open their wallets for jewellery last month, even as the price of the precious metal reached record highs. Average sales stayed on par with June last year, boosted by expatriates stocking up on gold jewellery before heading home for the summer holidays.
And with the gold price expected to rise to as much as US$1,500 per troy ounce this year, consumers headed to the shops rather than waiting for a better deal, retailers say. Chetan Karani, the deputy managing director of the Dubai Gold and Jewellery Group, said the high gold price slowed the June rush down slightly, but consumers were now accustomed to paying more. "People probably feel that if they don't buy it now they're going to have to buy it at a higher price later on," Mr Karani said. "It's maybe not a good idea to keep postponing a purchase."
The price of spot gold hit a record high of US$1,284 per troy ounce last week, before falling slightly to $1,238 yesterday. This marks a rally in the gold price of more than 30 per cent compared with July 1 last year. The gold price rose steadily last year, putting extra pressure on gold and jewellery retailers in the emirate. Last year, demand for gold jewellery in the UAE fell 47.9 per cent, to 67.6 tonnes from 100 tonnes in 2008, statistics from the World Gold Council show.
But consumers appear to be adjusting their expectations this year. In the first quarter, 18.9 tonnes of gold jewellery was sold in the country, a 29 per cent rise from the 14.6 tonnes sold in the first quarter last year. This is still below the 21.9 tonnes of gold jewellery sold in the first quarter of 2008. There does not seem to be relief on the way for gold retailers, as prices are expected to keep surging.
Dan Smith, a metals analyst with Standard Chartered in London, said the bank expected the price of gold to reach an average of $1,300 in the third quarter and $1,400 in the fourth. Mr Smith said that at most, the cost of the precious metal on world markets could touch $1,500. The momentum is driven by investors in Europe worried about the falling currencies and putting their money into gold as a safe haven, he said.
"People are worried about the euro zone, and the tendency to buy gold and silver is protection against currency weakness," Mr Smith said. He said investors in India and China were turning to the precious metal to offset the accelerating inflation there, while central banks in countries such as Saudi Arabia and Russia were increasing their gold reserves. Tushar Patni, the owner of Ajanta Jewellers in Abu Dhabi and a member of the emirate's Gold and Jewellery Group, said sales last month were about the same as last year. Shoppers continued to buy gifts for family and friends with no price drop on the horizon, Mr Patni said.
"People are still expecting it to go higher," he said. "They are not waiting. They are coming to terms with these prices." firstname.lastname@example.org