Traders are busy this Holy month with surging demand for gold from customers amid a 20 per cent decline in its price this year.
Abu Dhabi jewellers buoyed by Ramadan rush for gold
Abu Dhabi jewellers are busy this Ramadan as surging demand for gold from customers comes amid a 20 per cent decline in the price of the yellow metal this year.
Traders have reported up to a 30 per cent rise in sales activity helped by growing consumer confidence as the emirate’s economic recovery gains further strength. “The start of Ramadan has been good so far,” said Riyad Musbah, the general manager at Riyad Jewellery in Abu Dhabi’s Madinat Zayed Gold Centre.
“The prices are relatively lower and people are more comfortable with buying.” Mr Musbah said jewellers were anticipating the days leading up to Eid would prove whether that trend continued. “It’s usually five days before the holiday that most of the activity happens.”
The nosedive in the gold market has improved the fortunes of jewellers countrywide, who were struggling to sell the bullion to customers after it peaked to US$1,789.73 an ounce last year.
Bullion has lost 20 per cent of its value since the start of the year, with spot prices trading at $1,313.75 an ounce yesterday.
But traders are worried the yellow metal’s attractiveness may not stay for much longer after India introduced new regulations that curbed imports and drove prices higher.
“India is the key player in this,” said Mohamed Shakarchi, the founder and managing director of Emirates Gold Refinery in Dubai.
“Every year they have $60 billion to $70bn incoming and now, the balance of their payments, they are importing more than they are exporting. So their reserves are coming down very rapidly.”
The country introduced new regulations in a bid to stifle gold buying. It doubled its import tax to 8 per cent from 4 per cent at the start of the year.
The regulations also require that a fifth of bullion imports be used for export. The new rules have spurred a halt in imports since July 22, Bachhraj Bamalwa, the director of the trade body All India Gems and Jewellery Trade Federation, told Reuters.
“Following the Indian central bank’s introduction of further measures to curb gold imports, physical premiums have risen sharply in India,” said a research note from Commerzbank.
Gold rose 7.3 per cent from July 1 to July 31, which is its biggest monthly gain since January last year.
Hopes of further fiscal and monetary easing has helped keep prices steady. Commodities traders are looking for cues from the US Federal Reserve on when it plans to halt its fiscal policy, known as quantitative easing.
“We see some speculative buying on gold and silver,” a Hong Kong-based precious metals trader told Reuters. “Stops were triggered once gold hit $1,330. There is also month-end buying from funds as they window dress their portfolios.”