Is gold losing its shine? Jewellery demand in UAE drops 6% in 2019

Gold jewellery sales in the UAE hit a slump in 2019, as high prices discouraged many consumers from making new purchases, a new report suggests.

A total of 34 tonnes of gold jewellery were sold across the UAE last year, down 6 percent from 2018, according to Gold Demand Trends, a report on the gold industry by the World Gold Council (WGC).

Declines were likewise reported in other markets, with the total global demand dropping 6 percent and Middle East demand falling 2 percent.

“Widespread weakness in demand across the rest of the region was primarily a response to the higher gold price, particularly as consumers in these markets continued to face economic and geopolitical challenges,” the WGC report said.

According to the report, the overall weakness in demand was primarily due to the big jump in the gold price during the third quarter of 2019, which impacted affordability. However, in value terms, the amount that consumers spent on gold increased in 2019.

“In US dollar terms, [global] gold jewellery demand grew by 3 percent to a five-year high of $94.3 billion,” the report said.

The precious metal rallied in 2019, averaging at $1,481 an ounce in the fourth quarter, as the uncertainty over the trade war between the United States and China, drove investors to safe-haven assets.

“This was the highest average price since [the third quarter of] 2013,” the World Gold Council said. As a result, gold priced in various currencies – including euros, Indian rupees, UAE dirhams and Turkish lira – hit their highest levels in history. In the UAE, the per gram price of 24-karat gold climbed from 157 UAE dirhams in January to more than 175 UAE dirhams ($48) per gram in September.

“It was a 10-year-high price rise last year, so it is not surprising that consumers took a cautionary approach,” Karim Merchant, group CEO and managing director of Pure Gold Jewellers, told Zawya. The retailer, which operates 120 stores across the UAE, Oman, Kuwait, Qatar, Jordan, Saudi Arabia and Bahrain, said demand for gold jewellery was particularly “soft” in the second half of 2019.

Merchant, however, pointed out that despite the slowdown in demand, the precious metal has cemented its status as a “good investment,” citing that there was an increase in the number of consumers selling gold in the second half of 2019, pushing the global gold supply to rise by 2 percent.

However, Abdul Salam K.P. group executive director of Malabar Gold and Diamonds, said the decline in demand should not be taken as a sign that consumers has lost confidence in gold.

He pointed out that in terms of value, the UAE consumers spent more out of their pockets to bring home new jewellery last year, owing to high prices.

“In money terms, people spent about 10 percent more on gold in 2019 than they did in 2018 because the prices were higher. But, if you take the weight of gold jewellery sold, there’s a 6% decline,” Salam told Zawya.

“People still have a budget to buy gold and they always stick to it,” he added.

Malabar has recently offered up to 70 percent discount on jewellery items sold at five locations in the UAE, to coincide with the Dubai Shopping Festival (DSF) promotions. During the promotion, Salam noted an increase in gold buying activity.

Courtesy: ZAWYA