Gold sales in the UAE are being hampered by record-high prices, but the appeal of the commodity as a safe bet against inflation remains, say retailers.
"The gold prices have gone up by $120 (Dh440) an ounce over the last two weeks. People are hesitant to buy at these levels. July sales have been badly affected by high prices," said Tushar Patni, managing director of Ajanta Jewellery in Abu Dhabi.
But Shamlal Ahammed M.P., managing director- International Operations for Malabar Gold, said history and trends indicate that investing in gold is safer and the yields are much higher compared to other forms of investments.
"As the gold price hits a record high, the investors who flocked to gold have seen its value rise by almost 35 per cent compared to last year," he added.
Patni said gold sales in Abu Dhabi have dropped more than 20 per cent to about 500 kilograms a month compared to a year earlier as high volatility in prices of the precious yellow metal have led to some demand destruction and changed consumption patterns.
"Sales of gold coins and gold bars have risen, in comparison with gold jewellery in recent months," he added.
Retail gold sale volumes in Dubai and Abu Dhabi dropped by around 10 percent in April year-on-year as high prices deterred consumers.
"The gold prices will continue to rise in the near term," predicts Mohammad Amin, owner of Al Safina Jewellery in Abu Dhabi. "Due to rising gold prices, the sales have come down. However, those who have higher savings seem to be more interested in purchasing gold bars than jewellery."
The gold prices yesterday touched an all-time high of $1,609.51 an ounce before dropping to $1,601.30 an ounce.
Gold prices remained elevated as investors continue to favour the metal amid heightened concerns that the debt crisis engulfing Greece may ensnare Italy and Spain, and as time grows short for raising the US debt ceiling.
Gold is up 13 per cent this year, heading for an 11th straight annual gain, the longest winning streak since at least 1920 in London.
Gold prices are set to continue their upward trend in the coming years as the outlook for the precious metal continues to remain bullish, analysts say.
Gold futures Tuesday rose to a record $1,610.70 (Dh5,915.62) an ounce on the Comex in New York while gold for immediate delivery climbed to over $1,610.10 an ounce.
A combination of the geopolitical unrest in the Middle East, the ongoing debt crisis in the US and Europe, high fluctuation in currencies, downward trend in the reality sector and the low profitability from corporate firms has diverted the investor focus from stocks, currencies and real estate towards gold.
"Gold prices are linked to uncertainty and the reason that gold has had such a good run recently is because of rising risk aversion as a result of the Eurozone debt problems. Gold offers a potential for capital gain if currencies are debased," said Giyas Gokkent, Chief Economist, National Bank of Abu Dhabi.
From / Gulf News