UAE: Gold jewellery loses shine as demand plunges 15% in Q3

Gold jewellery demand in the UAE fell 15 per cent year-on-year in the third quarter of 2023 to 9 tonnes mainly due to unprecedented demand recorded last year as markets returned to their full normalcy after the pandemic, according to World Gold Council’s latest data released on Tuesday.

However, UAE gold jewellers are optimistic about the recovery in sales in the fourth quarter, which has traditionally been the peak season for gold and jewellery sales due to festivals as well as increased inflow of tourists.

The UAE gold jewellery sales in the first 9 months fell by nearly 19 per cent to 29.5 tonnes as compared to 36.4 tonnes in the same period last year.

Meanwhile, demand for gold bars and coins jumped by 55 per cent to 3.3 tonnes in Q3 2023 as compared to the same quarter last year.

In 2022, almost all the sectors of the UAE economy bounced back very strong as the local and global economies fully reopened after the pandemic. The UAE economy grew at an exponential pace of 7.9 per cent, one of the fastest rates achieved by the economy. Thanks to a high inflow of tourists and increased local consumer spending, gold jewellery demand spiked last year.

The precious metal prices rose this month in the wake of the outbreak of the Middle East conflict between Palestine and Israel. Prices touched $2,000 an ounce on Monday but dropped below the key psychological barrier on Tuesday morning.

The yellow metal prices hit a 7-month low a few weeks back, prompting UAE residents to opt for ‘lock-in’ options ahead of the Dhantera and Diwali festivals with some of the jewellers reporting a 200 per cent increase as compared to last year.

John Paul Alukkas, managing director, Joyalukkas Group, said the impact of gold prices on jewellery purchases in the UAE has been significant.

“Given that gold is the go-to asset in the region, fluctuations in gold prices have a direct effect on consumer behaviour. During periods of lower gold prices, there is often an uptick in jewellery purchases, as consumers perceive it as an opportune time to buy. Conversely, when gold prices are high, consumers tend to reduce their jewellery purchases due to cost concerns,” he said.

Alukkas revealed that jewellery retailers often need to adapt to these price fluctuations by offering promotions, and discounts, or diversifying their product ranges to cater to varying consumer sentiments driven by gold price movements.

The World Gold Council’s Q3 Gold Demand Trends report revealed that jewellery demand remained resilient in the face of elevated gold prices, but there was a slight softening of jewellery consumption, down two per cent year-on-year to 516 tonnes, due to cost of living pressures on consumers in many markets around the world.

The World Gold Council’s Q3 Gold Demand Trends report revealed quarterly gold demand (excluding OTC) to 1,147 tonnes, 8 per cent ahead of its five-year average.

Central banks saw the third strongest quarter of net buying, reaching 337 tonnes. Although shy of breaking the Q3 2022 record, year-to-date demand has reached a new record of 800 tonnes. This strong buying streak from central banks is expected to stay on course for the remainder of the year, indicating a robust annual total again in 2023.

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