DUBAI: The City of Gold had witnessed even higher prices of gold in the past and the current high rate is not a deterrent for people to buy gold in Dubai.
However, there is a slowdown in the retail sale of gold jewellery due to vacation and import restrictions in the world’s largest gold market, India, they said.
The increasing prices of gold have boosted the enthusiasm of investors to invest in gold at an international level, according to reports from India and elsewhere.
The closing price of gold on Friday was $1,670 per ounce in the international market and the opening price per gramme in the UAE for 22ct gold on Saturday was Dhs187.75 per gramme.
In India, it touched an all-time high of Rs23,130 per sovereign (8gms) and Rs2,891 per gramme on Saturday.
This all-time high price tag on 22ct gold jewellery has also slowed down gold ornament purchases in Dubai, tipped as the City of Gold in the Middle East, said sources at the Dubai Gold and Jewellery Group (DGJG).
Indian newspapers attributed this unprecedented hike in gold prices to the international gold market situation due to a United States’ move to strengthen the economy and the depreciation of the Indian rupee against the dollar.
Chief Operating Officer (COO) of UAE Exchange Centre Sudhir Kumar Shetty put it this way: “More than demand and supply scenario, prices of gold are controlled by several other factors. The mood of the international investors depending on stock market, securities, currency rates and market volatility is a factor in favour of investment in gold. The physical demand is only part of the current price hike,” he told The Gulf Today on Saturday.
A source at DGJG equated the current Dhs187.75/gramme price to last November/December price of Dhs226/gramme. In the international market gold bullion was sold at $1,920 during this period, he added.
The source, however, added that the high prices have slightly slowed down the local market.
General Manager of Sky Jewellery Syriac Varghese added that the current scenario might prevail till the end of this month, until the US Federal Reserve meet to decide on “the additional stimulus to further boost the economy.”
“Gold prices were steadily going up from the $1,600/ounce range to reach $1,671 during the past four-five days. It could go up again till the end of August and then depending on the US Federal Reserve decision may further go up or come down,” Varghese said.
The best bet
He added that as a long-term investment gold is the best bet. Other sources from prominent gold jewellers like Atlas Jewellery, Alukkas Jewellery and Chittilappalli Jewellery have reiterated this absolute role of gold as a long-term investment.
For Indians in the Gulf who purchase gold not as an investment but as ornaments, the golden touch has become a far cry.
For several parents of Indian girls, the news of the spurt in gold prices was like piercing a dagger into their hearts.
Ambika Gopi, a mother of two grown-up girls, was dismayed on Friday when this correspondent talked to her about the price of gold.
“I need to purchase at least 50 sovereigns of gold for each of my daughters to give them at the time of their marriage. At the current rate the cost will be a whopping Rs2.32 million (Dhs154,600 approximately) and therefore we cannot even think about it,” said Gopi, who hails from a middle class family in north Kerala.
For extravagant Indian weddings, all that glitters is always gold. In this situation communities that traditionally offer most of their dowry in gold are looking for alternatives such as fixed deposits and real estate.
A few families are paying more in the form of cash as dowry or using bank deposits.
In some communities where it is a common tradition to exchange huge amounts of gold during weddings the total dowry amount is decided during negotiations, said Chandraprakash, who hails from Thodupuzha in Ernakulam district.
The case is not much different among north Indians.
“My brother is getting married soon. Our budget for gold is Rs200,000. I am afraid how much gold can I buy with this money, just a few sovereigns?” wondered one senior member of a Muslim family from Kolkata.
In this scenario, the gold import restriction regulations in India are expected to increase the chances of smuggling of gold as in the past, experts said.