Gold prices set new high - shoots past$2,200/oz after near $50 increase in 30minutes

Shoppers in UAE and elsewhere will have to bide their time for gold to cool

Vijay Valecha, Gulf News, March 21, 2024

Dubai: Gold shoppers in the UAE and everywhere else will need to wait longer for some price relief, as prices went past $2,200 an ounce for the first time ever early on Thursday.

Gold is now trading at $2,204 after a massive $47 hike over the last 30 minutes or so, and obviously reacting to the latest announcements by the US Federal Reserve late yesterday. The US regulator left rates untouched but hinted at possible multiple cuts later this year. The dominant opinion is that the first cut could be in June.

Whatever be the case, action on the gold price front was bound to happen. And the reaction has been immediate, which explains the jump by $47 to clear $2,200. "Gold's next movements were always going to be linked to the US Fed decision, but what all this points is that prices will remain elevated at $2,100 and over," said Abdul Salam K. P., Vice-Chairman of Malabar Gold & Diamonds.

"With the current prices, UAE jewellers will likely extend the discounts offered on making charges to stay competitive on pricing. And probably, the UAE gold market could also start thinking of options other than raffle draws to boost spending." (Another strategy would be to promote 18K collections more aggressively, especially with younger buyers. The 18K price in the AE is at DH201.25 a gram.)

The UAE gold rate is now at DH42.50 a gram for 22K and will reflect the latest increase by 9am. The highest it had hit in the last 10 days was Dh244.50.

Upwards of $2,000 for the near future seems to be the consensus among UAE jewellery retailers, and which means shoppers too will be changing how they approach gold buying. Above all, there needs to be a change in mindset about the prices at which they are comfortable buying.

So, if $1,700-$1,800 an ounce was what shoppers typically would have made a rush for, that could soon change to when prices slip to $1,900-$2,000.

Just look at this figure - based on current rate, gold prices are up by $856 on an ounce basis from what they were in 2019. That's higher by 65 per cent. Just in the last 30 days, this 'safe haven' asset is firmer by $132 on an ounce basis. (One troy ounce is 31.03 grams.)

"Gold soaring above $2,200 is not an over reaction to the Fed delivering a dovish statement. Gold along with
equities jumped as markets were boosted by the Fed interest rate projections that foresaw three cuts this year,
despite still-sticky US inflation.
"The fact that gold is making new highs at these interest rates is a clear sign of the extremely strong bullish cycle for gold that we are in." 
- Vijay Valecha, Chief Investment Officer at Century Financial

What should UAE shoppers be doing?

Every major UAE jeweller is running steep discounts on their making charges as part of the Ramadan promotions. Some have waived making charges in full on some of their collections. Or shoppers could exchange their current gold holding for new purchases. Currently, jewellery retailers say they are seeing around 30-50 per cent of purchases now featuring shoppers wanting to exchange. (In some cases, this figure goes up to 70 per cent.) The rule of thumb is that shoppers are better off exchanging gold they bought before 2020 to get the best possible returns. After 2020, gold had been mostly averaging $1900 levels.

What shoppers with definite plans to buy should not do is keep 'waiting' for prices to drop, retailers say. "When the price is going low, certain customers prefer to wait for a further lowering," said Thomas at Joyalukkas Jewellery. 
"Similarly, when prices head higher, certain shoppers will obviously wait for prices to drop. Gold has been going in
one direction for the last 23 years - and it will continue.
"Waiting for a 'good' price to buy gold is not a good idea, especially when promotions are on."

Two key gold buying phases

Closer to and during the Eid holidays has always been a good one for gold buying activity. It's a moot point whether shoppers are willing to overlook the current price levels and commit to new purchases. More likely, they will rely on exchanging their current gold holdings to ease the cost of buying new.

Then in early May, thee is the Indian festival of 'Akshaya Trithiya', again a peak period for gold buying here. If prices soften at any point between early April to May 10, the day of Akshaya Trithiya, that will help support
demand.

Will tourists keep buying?

Jewellers hope tourists will keep spending on gold whatever be the price. "Tourists view purchasing gold jewellery here as a staple part of their itinerary, benefiting from comparatively lower prices," said Arjun Dhanak, Director at Kanz Jewels. "In today's digital era, customers can easily compare gold prices.

"While staying mindful of market fluctuations, our focus remains on delivering exceptional designs and
competitive pricing to ensure shoppers feel confident in their purchases. And alleviate any of their concerns about
overspending or whether to wait for potential price drops." 
The coming days will all be about trying to settle shopper concerns on prices.

"We're diversifying our gold collections to cater to various shopper budgets. While we're introducing entry-level collections to capture attention, we're also maintaining our commitment to premium and luxury pieces to meet diverse preferences. Our entry-level collections provide value for money without compromising on design or the quality, ensuring customers find something that resonates regardless of prevailing gold price dynamics."
- Chirag Vora, Director of Bafleh Jewellers

Source

Gulf News