Gold merchants across the country are braced for the busiest trading day of the year so far as sales of jewellery and bullion are expected to be given a double boost from today's Hindu festival of Akshaya Tritiya and a persistent bear market.
"There is a dramatic appetite for gold today. The Indian festival is important and also because of the price dropping," said Tarek El Mdaka, the managing director of Kaloti Gold in Dubai.
Dubai has benefited from a renewed buyers' market in gold since the price plunged more than 20 per cent last month.
Investment funds that had hoarded the yellow metal since the start of the financial crisis sold off hundreds of tonnes in a matter of hours, sending prices through the floor.
Gold rose from less than US$850 a troy ounce in 2008 to more than $1,920 at its peak last September. After last month's sell-off, the price has been stuck in the low $1,400s and was last night at $1,436.55 an ounce.
The reduced price has ushered in a new wave of small-time investors with Indian and Chinese buyers coming to the fore.
"The 22-carat market is very strong on festivals like Akshaya Tritiya," said Kiran Pithani, the owner of Cara Jewellery in the Dubai Gold and Diamond Park.
"Indian buyers are crazy for 22-carat gold for these festivals. Akshaya Indians have to buy gold, it is good luck. When the price is as low as this they buy more. It's as simple as that."
Traditionally Hindus and Jains buy gold jewellery or trinkets made from the precious metal as gifts for festivals such as Ashkaya Tritiya in spring and Diwali in November.
This year, however, sales in the UAE are focused on small coins and ingots known as wafers or biscuits instead.
"Indians are buying less jewellery and more biscuits this year. Anything below $5,000 apiece is what we are seeing. There is very strong demand for these products," Mr El Mdaka said.
He added that sales of such small investment grade ingots and coins were given an extra boost this year as India has increased taxes on gold imports in an effort to exert tighter control on monetary policy.
"So there is a great arbitrage to be done here. If you buy in Dubai and travel to India with a couple of small coins or biscuits for your personal use you are making a couple of hundred dollars given the 6 per cent tax. Enough to pay for your flight. That is one reason why these products are so popular."
