Gold is regaining consumer interest as a safe haven

As prices fell 8% during the quarter, global consumer demand for gold jewellery experienced its strongest quarter in a while. In actuality, jewellery purchases during the July to September period totaled 523 tonnes, exceeding the 501 tonnes quarterly average for the previous five years.
“Demand for jewellery demand is back to pre-Covid times – back to normal,” said John Mulligan, Director for Market Relations at World Gold Council. “What we are seeing is a healthy consumer market, and apart from jewellery there is strong bar and coin demand too.”
The trend is continuing. In the UAE, October has been an exceptionally strong month, as prices kept to in and around $1,650 an ounce levels (or under Dh190 a gram for 22K in terms of UAE gold rate) for much of the time. Currently, gold prices are down to $1,632, ahead of the expected US Fed rate hike on Tuesday (November 2), which typically would mean dollar gains and decline in bullion prices.
UAE consumer demand was brought on both by the weaker gold prices and the heavy buying that happened in the run up to Diwali on October 24. Retailers say that particular weekend sales was the best they had so far this year.
In the days since, tourist buying has emerged strongly to support demand, as ‘safe haven’ buying of gold picks up momentum. “Visitors from the other Gulf countries, especially Saudis, and from Indian subcontinent have driven gold buying all through October,” said a retailer. “If prices remain at around Dh185 a gram, we can expect tourists to remain interested in the next two months.
“As for resident shoppers, it might be some time before we see levels back to what we saw during Diwali.”
Tourist-led shopping will continue even with the latest Fed rate hike, expected to be by another 0.75 per cent. (If so, this would be the fourth successive time the increase has happened by this margin.)
“It’s not the case that gold prices have immediately dropped with each US rate increase,” said Mulligan. “A lot of that is already factored into the gold pricing, which is why there is little immediate headwind once the rate increase comes into effect. And even if there is a headwind, it’s relatively short-lived.”
According to UAE jewellery retailers, they have already factored in a higher demand from tourist buyers in the coming weeks. “If October was strong, November is going to be exceptional,” said Shamlal Ahmed, Director of International Operations at Malabar Gold & Diamonds. “One of the must-buys from Dubai or the UAE is gold, irrespective of where the tourist is coming from.
“After 3 years, we are back to seeing MICE and ‘incentive travel’ return to Dubai in a big way, with global companies bringing their employees together here for conferences or just to reward them.
“Plus, the weddings in Dubai is again likely on track to have another bumper season, and we can feel that in our jewellery demand for upcoming wedding ceremonies happening at the Palm or elsewhere. The ‘Destination Dubai’ project has been one of the biggest boosts for gold sales in the city.”
During the quarter gone by, there was an 8 percent drop in gold price, after being in the $1,700 and over range for the better part of the year. (In March, gold had shot up past $2,000 briefly after the launch of the Russia-Ukraine conflict.)
“In what is a difficult year for equity and bond portfolios, gold has held up well,” said Mulligan. “On a year-on-year basis, gold is only down 3 percent.”
One of the factors contributing to jewelry’s great performance from July to September was shopping in India. Even after the import tariff was increased to 15%, this continued. The Indian gold and jewellery sector is “remarkably tenacious in absorbing change,” according to Mulligan. “The normalisation in demand patterns happen swiftly, even with circumstances like duty spikes.