Global gold prices rose to a new high yesterday, a move likely to dent the pockets of shoppers to Dubai's gold souqs.
Gold at record as investors seek haven
Shoppers in Dubai's gold souqs face a steep increase in prices after the precious metal set record highs in global markets.
Gold rose yesterday as fresh concerns about the US and European economies boosted appeal for the metal as a safe-haven asset.
The commodity rose for a ninth day, its longest consecutive gain since April, rising as much as US$12.07, or 0.8 per cent, to $1,594.45 an ounce. It has advanced 12 per cent so far this year.
The scale of the rise was a shock for visitors to the Gold Souq in Dubai Mall, said Chetan Dhakan of National Jewellery, a retailer in the shopping centre.
Retail prices were up by about $50 per ounce in the past week as a result, he said. "Some customers have been shocked and I've had to show them the global price on my computer," he said.
"When prices rise people tend to be more conservative, maybe buying 30 grams instead of 50 grams."
Gold has formed an increasingly bigger slice of trade in Dubai as global prices have edged higher this year. The precious metal was the largest single export from the emirate by value in the first quarter, accounting for Dh17 billion (US$4.62bn) of exports, according to Dubai Customs data released this week.
Retailers at the Gold Souq said demand was holding up despite a slower than usual pace of overall business because of the summer season.
"The price may be rising but people are buying gold as it's a safe investment," said Mohammed Elias, a sales executive at Skyze Jewellery.
Yesterday's global push was sparked by fresh debt woes eroding the attractiveness of the US dollar and the euro. The dollar declined against six major currencies after the Federal Reserve chairman Ben Bernanke on Wednesday said the central bank was prepared to take additional action if required to bolster the economy, including buying more government bonds.
Yesterday, Moody's Investors Service warned the US government might lose its top credit rating if the government's debt threshold was not raised in time to prevent a missed payment of interest.
In the euro zone, meanwhile, Fitch Ratings slashed Greece's rating and said a default was a "real possibility".
The previous rounds of so-called quantitative easing by the Fed have enhanced gold's appeal as a hedge against economic risks.
Dollar-denominated commodities, including gold, seem cheaper to holders of other currencies when the greenback weakens. But gold may move up even without any further government stimulus, some analysts say.