Saving on gold? Be patient

Dubai - Jewellery buyers in wait-and-see mode in the wake of metal's bearish outlook.

Gold jewellery sales have yet to pick up momentum despite the steep fall in bullion prices in the past week as buyers are adopting a wait-and-see approach in the wake of a bearish outlook for the precious metal, according to industry experts.
Leading jewellers in Dubai are not very much concerned about the metal's volatility and expect that gold prices will stabilise at a rational level in due time. There was no rush in gold shops over the weekend as buyers are expecting a further decline in bullion prices, which reached a fresh five-year low of $1,072.35 an ounce last week.
John Paul Joyalukkas, executive director at Joyalukkas Group, said the decline in gold prices usually drives retail jewellery demand and it has been the trend over the years. However, the sharp decline will translate into incremental sales only if it is sustained for a few days.
"At the moment, the gold price is fluctuating constantly. It is too early to draw any conclusion," Joyalukkas told Khaleej Times.
Gold dropped more than six per cent in the past 10 days in the longest run of losses since 1996 as Goldman Sachs Group predicted a price below $1,000 an ounce for the yellow metal. ABN Amro was also bearish on the metal's outlook and said gold will fall to $1,050 by the end of September. But in the worst-case scenario, Morgan Stanley on Thursday said gold may tumble to $800 an ounce.
Saba Usman, a Sharjah resident, was exploring different jewellery shops at the Sharjah Gold Souk on Thursday evening but didn't finalise any purchase due to the volatility in prices.
"I have been visiting the gold shops since Monday but prices are sustaining a downward trend. I will buy jewellery once the prices are stable at some point," she said.
Adil Zubairi, a banker based in Dubai, said he is planning to buy some gold jewellery as prices dramatically fell in past week.
"I'm keen to buy gold jewellery but the price trend is not stable. I will wait for the better bargain options as the prices are still going down," he said.
Gold turned higher after sliding more than one per cent to its lowest since February 2010 on Friday. US gold futures for August delivery settled down 0.8 per cent at $1,085.50 an ounce. By Friday on the London Bullion Market, the yellow metal dropped to $1,080.80 an ounce from $1,132.80 a week earlier, reflecting a decrease of 4.6 per cent, or $52 over the week. "I think the current drop in gold prices are here to stay for the long term with the expected US interest rate growth, Greek crisis and China's massive selling of gold reserves," Karim Merchant, managing director and chief executive of Pure Gold Jewellers, told Khaleej Times. 
To a question, he said part of the recent decrease in gold prices can be attributed to oil prices, but there are other factors in play like the expected US interest rate hike, the fall in demand from China and a stronger dollar.
Merchant is optimistic of sales growth and said gold buyers will not resist low prices for a longer period. "Yes, consumers are now taking advantage of the low gold prices and buying it for their future," he said.
Joyalukkas said it is a little difficult to comment about sales as consumer behaviour normally changes when there is a steep decline in gold prices.
"We are confident that our existing summer promotion 'Joyalukkas drive your dream' will help lure shoppers to drive to our outlets," he said.
"We faced an average of 20 per cent plunge in sales in the normally-brisk pre-holiday trading period of June and July; the dramatic price dip worked in our favour to reignite consumer demand and lure shoppers to drive to our outlets," he added.
T.S. Kalyanaraman, chairman and managing director of Kalyan Jewellers, said the softening of the price of gold has augmented his firm's sales momentum in the UAE, which has been the result of concerted branding efforts and increase in the distribution network.
"In the last six months we have added four new showrooms resulting in a total of 10 showrooms in the region. We have registered over 50 per cent growth in the UAE in comparison to last year, which reiterates our growing brand acceptance in the market within just 18 months of our operations," he said.
To a question about the volatility in metal prices, he said: "We believe that the prices will settle at a rational level and are not very concerned about the present volatility."
- muzaffarrizvi@khaleejtimes.com

• Gold and Forex