Dubai gold falters on volatile prices

DUBAI — The gold market in Dubai is faltering because of limited Indian subcontinent import demand and volatile prices, traders said yesterday. Even though gold prices have dropped to below $900 an ounce recently, key Indian demand for Dubai re-exports has failed to re-emerge.

By (Reuters)

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Published: Sun 27 Apr 2008, 9:33 AM

Last updated: Sun 5 Apr 2015, 11:44 AM

“Demand is still low even with the current price levels,” one Dubai dealer said.

“It could, however, pick up soon as India enters the peak of the wedding season in May.”

India’s gold demand was moderate on Friday as easing prices, down to a fresh three-week low, incurred some buying, and dealers said it could increase for weddings and a festival in the last few weeks of the busy season.

Spot metal fell as low as $877.60 an ounce in Europe on Friday as a sharp drop in a gold-backed exchange-traded fund put a damper on bullion’s initial rally on the back of surging crude oil.

The yellow metal was expected to face further downward pressure after falling nearly 15 per cent from last month’s record high. Near-term sentiment had also turned bearish since gold broke its 100-day moving average of just above $900 an ounce last week, dealers said.

Dubai’s gold jewellery sales volume rose 12 per cent last month and five per cent in the first quarter of the year as buyers adjusted to current high prices, but traders said the recovery is likely to be short lived if prices remain volatile.

“It is true that lower prices attract buyers, especially after gold hit above $1,000 an ounce before,” a Gulf gold bullion trader said.

“But volatility here is a very important factor, especially when prices drop that much in a few weeks, which may make some think that they could drop much further,” he added.

Dubai is a long-established market for gold bullion and jewellery, wholesale and retail, fuelled by strong demand from the Arab world and India.

Tax-free jewellery in the Gulf commercial heart lures many Gulf Arab and Western tourists.

UAE’s full-year 2007 gold demand rose eight per cent to 99.8 tonnes, but it fell 8.1 per cent to 19.3 tonnes in the fourth quarter, the World Gold Council (WGC) has said.

Value of gold sales in the seven-member federation that includes Dubai rose 23.8 per cent to $2.6 billion in 2007. Fourth-quarter sales value reached $516 million, an almost six per cent increase from the same period a year earlier, it added.

“You can still see many tourists coming to the market and spending hours looking at jewellery pieces,” said Mahmoud Ali, jewellery seller at Barakat Gold.

“But the number of those who actually get into a jewellery shop and spend money inside is less compared to what it used to be last year. At the end of the day, gold prices are still not cheap for many buyers.”

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