Record High Gold Prices

Published on 12/11/09

Gold price's sporadic record-breaking run (it touched $1,117.05 an ounce yesterday) is having an adverse impact on the jewellery retail markets of Dubai. Gold broke its record for the third time in the past one week.

Jewellers in the emirate complain of a 30 to 40 per cent drop in sales over the last month and a surprising 70 per cent decline as compared to the same period the last year. Gold retailers blame high gold prices and a decline in the number of tourists visiting their shops for the fall in demand.

They are now waiting for the months of December and January when the number of tourists coming into Dubai generally picks up. "Our sales are down by about 30 per cent. We hold the high gold prices as the prime reason for such a decline," said Amit Dhakan of Dhakan Jewellers, a gold souq-based retail jewellery chain.

"The decline is 70 per cent as compared to sales the last year. People are simply not buying jewellery," said an employee of D Diamond, a free zone company, at Dubai Gold and Diamond Park. Jewellery sales had been steadily declining as prices crossed the psychological $1,000 an ounce resistance. However, consumers seem to have put a complete halt to the buying new jewellery after prices crossed $1,100 an ounce level. "People are waiting for the prices to come down," he said.

Retailers said 24-carat gold was trading at Dh1,300 per 10 gm in the local markets. Since there are no official figures published in this regard, the overall impact of the recession on Dubai's gold trade could not be estimated. Request to Dubai's largest gold retailer Damas did not draw a response.

Recent declines in jewellery sales are a sharp contrast over the gold investment. According to Deborah Fuhr, the head of ETF research at Barclays Global Investors, gold ETFs continue to attract strong investments and this is one of the prime reasons for the price rise.

Jewellers told Emirates Business that they expect the sales decline to stabilise at around 20 per cent if prices stay at the current levels for a long period.

"Retail jewellery sales are already down by about 40 per cent. The resurgent rally in gold price may further dampen our sales by another 20 per cent from the current levels," said Sanjay Jain of Al Mowaiji Jewellers.

Sale of diamonds has also been suffering because of what jewellers say is a cascading impact of declining sales of gold.

"The demand for diamond jewellery has declined by 50 per cent as compared to the last year," said Prashant Jain of Classic Diamonds, a free zone company.