Traders at Dubai Gold Souq hope for busy Eid despite record price surge

Historic souq in Deira is on the front lines of the precious metal's rally

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  Dubai Gold Souq in Deira is gearing up for a busy Eid Al Fitr. All photos: Pawan Singh / The National

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  Gold prices have reached record highs in 2024

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  The surge in global gold prices is being driven by factors such as anticipated US interest rate cuts, speculation, people seeking a safeguard against geopolitical uncertainty and major spending in China

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  Traders say they are still selling relatively well despite the price rises for several reasons including the increase in tourist arrivals since Dubai opened up swiftly after the Covid-19 pandemic

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  The traditionally busy Eid season that starts around now before the formal holiday is expected to help sales

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  People rest at the gold souq on a Ramadan afternoon

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  Lavish displays of gold at the historic souq

Traders at Dubai’s historic gold souq are hoping for a busy Eid Al Fitr despite the precious metal surging to record levels.

Gold prices hit a fresh high on Monday, breaking above the $2,350 per ounce mark as banks and investors enter the market.

The historic souq in Deira is on the front lines of this trade and, while some say sales have slowed the overall picture is complex.

"The gold price is affecting sales a little bit but not to the extent that we will see a major decline in sales," said Arjun Dhanak, director, Kanz Jewels.

Even when gold goes high, it is good to buy

Prasad Waknis

Mr Dhanak said Ramadan tends to be quieter for jewellers so, when combined with the higher prices, a drop was to be expected. But he noted the "first two months of this year were better than last year" without revealing exact figures.

Mr Dhanak ascribed this to the fact people had become used to the price levels during those months and other factors including the influence of Indian weddings such as the Ambani marriage in early March.

Gold rush

"That has a very good, positive, knock-on effect for jewellers because people are going out and buying jewellery for weddings," he said, stating he sees an effect from these events on the shop floor.

Mr Dhanak said the fresh highs this week might make people think twice about buying with Indians coming on holiday to Dubai no longer purchasing gold. People were now also moving to items with less gold and other metals such as platinum, he said. But Eid could change things.

“In the week prior to Eid we see an uptick in sales, which is probably now," said Mr Dhanak, who added visitors from Saudi Arabia still had spending power. "Eid should be good."

Shamlal Ahamed, managing director of international operations at Malabar Gold and Diamonds said sales remained high at its shops in the souq.

"Even though gold prices have been on an upward slope for the past few weeks, the customer footfall and subsequent sales across our showrooms in the UAE have remained high," said Mr Ahamed, stating special offers on gold had also helped.

Gold has surged to record highs this year. Pawan Singh / The National

The historic souq was busy when The National visited on Thursday with a multi-faceted picture emerging of how much was being bought and why.

While other traders said sales were not as high as last year with buyers being more cautious, some said people were intent on purchasing as they could make a profit if prices rise further.

A trusted commodity

Satyen Choksi, director of Nimisha Jewellery in Dubai, said an increase in prices usually causes a short term decrease in sales but strengthens the attraction of gold in the long term.

“The rise [in gold prices] generally points to the strength in the market and how it is being used as a safe haven,” said Mr Choksi, whose wholesale business sells gold jewellery to shops in the souq and abroad.

Mr Choksi said he had noticed the value of sales was up but volumes were down.

“Some of my friends who never wanted to buy gold are now asking me about it,” he said. “We haven’t had a bad month since Covid-19.”

However, the impact of Eid cannot be assessed until after the holiday and the picture of who buys is scattered, ranging from tourists to those celebrating Eid.

“People are being more cautious and waiting for what will happen next,” said Sayimarif, a salesman at Oasis Jewellery and Watches, who stated sales were down when compared with 2023 but tourists are willing to buy. “But Eid will always be busy."

Prasad Waknis at Barakat Jewellery said people were still keen to buy despite the surge in cost.

“People are complaining that prices are high and they are spending more,” said Mr Waknis, outside a shop adorned with gold necklaces and diamonds.

“But in gold sales we are still doing good,” he said, also stating he was expecting a busy Eid.

The surge in global gold prices is being driven by several factors such as anticipated US interest rate cuts, speculation, market volatility, a safeguard against geopolitical uncertainty and major spending in China, particularly in the run up to Chinese New Year.

High investor demand

The shops are lined with gold at Deira's bustling Gold Souk. Pawan Singh / The National

Andrew Naylor, head of Middle East and public policy at the World Gold Council, noted, however, that high global prices do have an effect on the UAE.

“The high international gold price does tend to impact jewellery buying more than other sectors of demand, which is why we saw a decrease in jewellery consumption in the UAE last year,” said Mr Naylor.

“What’s interesting at the moment is the growth of investment demand, which was up 34 per cent last year in the UAE.”

Mr Naylor said factors such as the UAE growing as a major wealth management centre and country of domicile for global high net worth individuals played a role.

“And new digital technologies being deployed in the gold market, attracting new investors to gold,” he said.

“For example digital gold accounts, or tokenised gold, where the underlying investment is physical gold but the channel of access is digital.”

According to the council, global demand for gold comes from four different sectors of the economy: jewellery at 35 per cent of annual demand; bar and coin investment demand accounts for 39 per cent; central banks at 19 per cent; and technology at 7 per cent.

Retail demand (jewellery, small bars, and coins) is mainly found in emerging markets - 71 per cent - with developed markets accounting for 29 per cent, it noted.

Experts also said there didn’t seem to be any end in sight to gold’s surge.

“At the World Gold Council we believe gold is a longterm, strategic asset,” said Mr Naylor.

Back at the souq, Mr Dhanak also said it was difficult to see a correction in the price soon.

“There is a lot favouring gold such as the Middle East conflict and interest rates. Nothing is going against gold at the moment.”

Mr Waknis, meanwhile, was anticipating a busy Eid Al Fitr.

“Even when gold goes high, it is good to buy.”