KHALEEJ TIMES, Wednesday, Mar 31, 2021 | Shaaban 17, 1442
UAE residents rush to buy gold as prices at 9-month low
Emirates:
UAE residents are rushing to buy gold after the yellow metal slumped to
a nine-month low.
On Tuesday evening, the precious metal was trading at $1,680 a troy ounce, down
23 per cent from the high of $2,072 in August last year.
In the UAE, gold was trading at Dh205.75 per gram.
“We are witnessing a significant increase in customer footfalls in the past few
days as customers are increasingly buying gold, taking advantage of the recent
dip in gold price and keeping the price movements in mind,” said Shamlal Ahamed,
Managing Director — International Operations, Malabar Gold & Diamonds.
Joyalukkas, another big retailer in Dubai, shares the same view. “There has been
good off-take and customers see the current price levels as very attractive and
hence the right time to buy. Gold is one of the best investment options and
considering the prevailing low-price level people should also look at gold from
an investment perspective that will give decent returns in the long run,” said
John Paul Alukkas, Managing Director, Joyalukkas Jewellery — International
Operations. “A considerable amount of customers are still interested in buying
gold bars from an investment perspective, however the major demand is still in
jewellery,” added Alukkas.
There has been a big rise in demand for the precious metal mostly among Indians
and Chinese who are top consumers of gold in the world. A visit to some gold
retailers in Meena Bazaar shows most of the customers buying jewellery or
bullion are Indians. “Growing up I had seen my mother investing money in gold,
and it has given her good returns. This year, I also started investing in gold
through monthly contributions. At the end of the year, I plan to buy jewellery,”
said Geetika Arora, a customer service executive based in Dubai.
The price of gold is higher in India and China than the global market and is
nearing its pre-pandemic levels because of continued buying interest.
“The positive growth combined with gold being the only consumable investment has
attracted young Millennials who are mostly first-time buyers, among whom there
is a significant demand for lightweight and multi-use jewellery — jewellery
which can be used on multiple occasions and are subtle and sophisticated,” added
Ahamed.
Gold losing lustre as
safe haven?
Uncertainty in economic environment supports assets like gold. However, with the
global economy recovering, equity markets staying buoyant, and rising interest
in cryptocurrencies, the safe haven appeal of gold is losing lustre and leading
to a fall in its value. “Gold prices are suffering in 2021 as investors move out
of haven assets (like gold and government bonds) into riskier markets like
equities. While the global economy is still very much dealing with the economic
consequences of the Covid-19 pandemic, the fact that vaccines are being deployed
and there is more clarity on eventual management of Covid-19 means that haven
assets don’t hold as much appeal as ones that would be geared to improvement in
the global economy. A stronger US dollar is also acting as a drag on gold prices
this year,” said Edward Bell, Senior Director, Market Economics, Emirates NBD.
The trend is expected to continue for most of this year. “We expect that gold
prices are going to fall in 2021. They can spend considerable time below
$1,700/troy oz for much of the second half of 2021,” added Bell.
Globally, investors are paring holdings in this asset class. Gold-backed
exchange traded funds (ETFs) are witnessing continued outflows. Gold ETFs
reflect the value of gold and are traded on exchanges just like company stocks,
eliminating the need for safekeeping of the precious metal, while still assuring
its inclusion in one’s portfolio. Data on the World Gold Council website
suggests ETFs have suffered an outflow of 224.9 tonnes in the last year.
The yellow metal is also facing stiff competition from cryptocurrencies that are
emerging as a new asset class that acts as a hedge against inflation. The market
cap of cryptocurrencies is nearing $2 trillion on the back of increased
interest.
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