Gold bars run short in Emirates as price retreats

Gold buyers flock to UAE shops, after the price drops by roughly $100 per troy ounce, triggering short-term shortages of small gold bars, retailers say.

Worth its weight: the decline in the price of gold last month whetted the appetites of buyers of the precious metal. Petr Josek / Reuters

The dip in the price of gold spurred sales of the precious metal in the UAE last month, leading to shortages of small bars, retailers say.

The gold spot price slipped from US$1,412.63 a troy ounce at the end of December to $1,314.82 on January 28.

That whetted the appetites of gold buyers, and sales of jewellery and bars in the UAE grew by as much as 25 per cent last month compared with January last year, said Tushar Patni, the owner of Ajanta Jewellers in Abu Dhabi.

"We saw about 20 per cent to 25 per cent increase in sales [last month], compared to the same time last year, just because of the prices," said Mr Patni, who is also a member of the emirate's Gold and Jewellery Group.

He said the surge in demand had depleted his reserve stocks of small gold bars weighing 10 grams and 100 grams, and Abu Dhabi retailers had short-term difficulties replenishing their stock.

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"The worst week was last week," Mr Patni said. "Practically, there was not anything available with any of the suppliers."

Sales of gold, a popular item for tourists and Asian expatriates who buy it as an investment, have been hampered over the past year as the price reached record highs above $1,400 a troy ounce. The average gold price in 2009 was just $972.35 on the London PM fix, data from the World Gold Council showed.

Spot gold was trading at $1,347 yesterday afternoon. The latest gold demand figures show about 18.8 tonnes of gold was sold in the UAE in the third quarter of last year, down 6 per cent from the same period in 2009.

But because of the higher price, total value of gold demand in the UAE in the third quarter hit $741 million (Dh2.72 billion), up 20 per cent on the same period in 2009.

The lower price last month enticed more consumers to open up their wallets and invest, said Majed Karim, the managing director of Swiss Gold, a wholesaler of gold bars based in Dubai.

Mr Karim said demand for bars last month surged by between 18 and 20 per cent compared with December. This led to shortages last month of gold bars for about five days, he said. Sunny Chittilappully, the vice chairman of the Dubai Gold and Jewellery Group and the chairman of Chittilappilly Jewellers, said gold jewellery sales rose last month by between 30 and 35 per cent compared with December, due to cheaper prices and the Dubai Shopping Festival.

"There is a lot of tourists and customers are more interested in buying gold because the price is very attractive," Mr Chittilappully said.

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The price of gold has fallen due to positive economic data on employment and manufacturing output in Europe and the US, said Pradeep Unni, a senior analyst with Richcomm Global Services in Dubai.

Investors turn to gold as a safe haven in times of economic uncertainty but demand has taken a back seat amid the current emerging recovery, Mr Unni said.

"Under these conditions, there is less need for investors to invest into gold as a risk cover," he said. "They tend to take more risk when things are going well and would rather invest in riskier markets."

The unrest in north Africa, particularly Egypt, has driven up the price of gold slightly in recent days.

Mr Unni said he did not expect that to be a long-term trend.

"It has driven it up a little bit … in the medium term, we can see some selling pressure. It is possible to slide to $1,290," he said.