UAE records world’s highest Q3 upturn in gold jewellery demand

Gold price, which has been on a consistent decline for several weeks, snapped a two-day downtrend on Tuesday at around $1,640 per ounce.

Gold jewellery demand in the UAE recorded the world’s highest upswing of 30 per cent in the third quarter of 2022 as global jewellery consumption continued to rebound to pre-pandemic levels, driven by India.

The upswing in jewellery demand was driven by improved consumer confidence and a dip in the local gold price, prompting the release of some pent-up demand, according to precious metals analysts.

Gold price, which has been on a consistent decline for several weeks, snapped a two-day downtrend on Tuesday at around $1,640 per ounce.

An increase in gold demand also underpinned the price rally, and analysts believe that given the market’s month-start consolidation, price may witness further recovery.

According to the World Gold Council, total global gold demand, excluding over the counter (OTC) hit 1,181 tonnes, was up 28 per cent year-on-year basis in third quarter. Strong demand pushed the year-to-date total to its pre-Covid levels.

Meanwhile, the third-quarter jewellery demand worldwide surged 10 per cent to 523 tonnes, with much of this growth spearheaded by India’s urban consumers who drove up demand by 17 per cent year on year to 146 tonnes, the WGC’s latest Gold Demand Trends report revealed.

While there was a notable contraction in investment demand across the globe, jewellery consumption “witnessed impressive growth in much of the Middle East, with Saudi Arabian jewellery consumption up 20 per cent since Q3 2021, and UAE up 30 per cent for the same period. Chinese jewellery demand also saw a modest 5.0 per cent increase YoY,” said the report.

“Gold demand was bolstered by consumers and central banks, although there was a notable contraction in investment demand,” WGC said.

Investment was down 47 per cent YoY basis, as ETF investors responded to a challenging combination of markedly higher interest rates and a strong US dollar with significant outflows of 227 tonnes.

“These movements, alongside weakness in OTC demand and negative sentiment in futures markets, hampered gold’s price performance – contributing to an eight per cent quarter-on-quarter drop in the price during Q3 2022,” WGC report said.

Louise Street, senior markets analyst at the World Gold Council, said despite a shaky macroeconomic environment, demand this year has reflected gold’s status as a safe haven asset, underscored by the fact that it has outperformed most asset classes in 2022.

“Looking ahead, we anticipate central bank buying and retail investment to remain strong and that could help offset potential declines in OTC and ETF investment that may prevail if the dollar strength persists. We also expect to see jewellery demand continue to perform strongly in some regions such as India and Southeast Asia, while the technology sector will likely witness further decline in the face of economic deceleration,” said Street.

Gold continued to hold favour with retail investors who reacted to different market cues and turned to gold for its status as a store of value amidst rampant inflation and geopolitical uncertainty. Investors sought to hedge inflation with bar and coin investment, driving total retail demand up 36 per cent, the WGC said.

While OTC demand contracted significantly during the quarter, echoing weak investor sentiment in ETFs and futures markets, central banks continued to accumulate gold, with purchases estimated at a quarterly record of nearly 400 tonnes. An 8.0 per cent fall in technology demand reflected a fall in consumer demand for electronics due to the global economic downturn, WGC said.

— issacjohn@khaleejtimes.com