UAE: Why are residents still investing in gold despite soaring prices?

For single mother Farah Abu Salah, saving up and investing is not always on her top list of priorities. However, whenever the Jordanian expat has some surplus amount of cash, the way she chooses to invest it is always the same - in gold. “I always go into a jewellery store and buy gold coins,” she said. “It is something that I have started doing recently, when I came to the realisation that I should have an emergency fund for a rainy day.”

Farah is one among the thousands of UAE residents who continue to be attracted to the allure of the yellow metal. Gold does not offer high returns, but it's a low-risk investment.

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“I know that I will probably get more returns if I invested in stocks,” said Farah. “However, I am a fairly new investor, and I am still figuring out how these things work. Gold just seems like a safer bet. I don’t have to download any apps, don’t have to read any charts and can walk into a shop to physically buy a gold coin.“

Gold saw a steep upward rise in 2023, hitting an all-time high, of around the $2,079-2,080 zone in May. In December, it hit another six-month peak on the back of expectations that an end to the US Federal Reserve's interest rate hike cycle would keep the dollar and yields under check. Even though the fading expectations of an early rate cut in the US has driven rates down since, the market remains bullish.

Mixed portfolio

Meanwhile for Mohammed Azhar Ali, gold is an important part of his portfolio of investments. The Indian expat not only regularly invests in stocks and bonds but also in gold.

“I usually invest in gold schemes with a popular jewellery chain,” he said. “As far as I am concerned, gold is very liquid and the downside for gold is much less compared to stocks or bonds.”

He said that his experience is similar to that of Farah’s - gold requires very little research and groundwork. “Finding the stocks or bonds that is going to perform requires a lot of time and effort,” he said. “Gold, on the other hand, is very safe and the possibilities of prices going down are very minimal. Besides, jewellery shops have the option of paying money over a period of time and redeeming it at the best gold rate. These make it feel like a very foolproof investment option.”

Extremely popular

Meanwhile, gold retailers in the country have said that the popularity of jewellery, bars and coins continues unabated, in the face of rising gold rates.

“Customers who prefer to buy gold coins and bars are primarily more investment-focused, [and] consider it a reliable investment during times of price appreciation,” said John Paul Alukkas, managing director, Joyalukkas Group. “Gold coins and bars are often seen as a secure asset, appealing to investors looking to diversify their portfolios. In contrast, jewellery, while retaining its emotional and aesthetic value, may take a backseat for some during these phases, with consumers prioritising gold in more liquid forms for investment purposes.”

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