Gold sales in the UAE are expected to remain weak this year after demand plunged to a 19-year low last year amid the oil price rout, pay cuts and lower spending by tourists, according to jewellers.
“This year we expect the market will continue without much of growth until the third quarter,” said Abdul Salam KP, the group executive director of Malabar Group, which has jewellery stores across the UAE. He said growth is expected to pick up in the fourth quarter.
The amount of gold bought in the UAE fell by 18.6 per cent to 49 tonnes last year compared with 60.2 tonnes the year before, the World Gold Council revealed.
“Low oil prices, weak tourist demand and salary cuts undermined gold demand in the UAE,” the organisation said in a report released on Friday.
Demand for gold jewellery, which makes up most of the gold bought in the UAE, was down by 16.3 per cent to 43 tonnes last year from 51.4 tonnes in 2015. Consumption of gold bars and coins meanwhile plummeted 31 per cent to 6 tonnes from 8.7 tonnes in 2015.
“There has been a slowdown in the global economy and at the same time the tourism flows are a little less into the UAE,” said Firoz Merchant, the founder and chairman of Dubai-based Pure Gold Jewellers. “Also, demonetisation happened in India, so most of the [Indian] tourists who come to Dubai normally buy gold jewellery, which they are not able to buy because of demonetisation.”
Gold sales at his stores declined by about 20 per cent last year. This was also going be a tough year in the UAE because the global economic outlook remained weak, he said.
“There definitely have been job losses in the UAE, which has affected gold demand,” said Somasundaram PR, the managing director, India, for the World Gold Council.
He said that Indian expats were among the biggest buyers of gold in the UAE.
India’s gold market also fell sharply last year because of regulatory changes and the surprise government move to scrap the two highest value banknotes in an effort to curb black money flows.
India’s gold demand was down 21 per cent to 676 tonnes from 857 tonnes, according to the World Gold Council.
The Middle East region had a 16 per cent drop to 193.1 tonnes last year from the previous year, with oil prices affecting demand in other Arabian Gulf countries including Saudi Arabia and Kuwait. Egypt’s currency crisis resulted in a 33 per cent decline to 25.5 tonnes.
But globally, gold demand rose by 2 per cent in 2016 to reach a four-year high of 4,309 tonnes, as investment into gold-backed exchange-traded funds surged.
“2016 saw an unprecedented degree of political upheaval, which underpinned huge institutional investor flows into gold,” said Alistair Hewitt, the head of market intelligence at the World Gold Council.
business@thenational.ae
Follow The National's Business section on Twitter
