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The gold retail industry is yet to recover from the impact of COVID-19, but diamonds and gemstones have fared better since late 2020 and will help lift the overall jewellery market this year, according to an industry source.
Diamonds and gemstones in the UAE have already seen an uptick in demand since late last year, with sales going up 80 percent year-on-year in the last four quarters, according to Shaunak Shastree, Managing Director of the International Gemological Institute (IGI) Middle East, the world’s largest independent laboratory for testing and grading gemstones and fine jewellery.
The jump in sales has been fuelled by major demand from customers whose huge disposable incomes have enabled them to shop for nonessentials even during the economic downturn.
Escalated gold prices, which hit more than $2,000 an ounce last year, have also triggered a shift to other types of jewellery.
“The [year-on-year] growth has been 80 percent [from Q4 2020 to September 2021]… The demand for diamond and gemstone jewellery is already above pre-pandemic levels. It’s not an understatement when I say the jewellery retailers are in their best year ever. But this is not the case for gold,” Shastree told Zawya.
The global jewellery market, which includes gold, diamonds and gemstones, is estimated to be worth around $230 billion today, with the UAE accounting for nearly one percent or $2 billion. Despite a decline in gold purchases, the overall jewellery market in the UAE is still poised to grow by 7 percent, thanks to a robust demand for diamonds and gemstones.
“There will definitely be an increase in demand due to Expo 2020. If we apply the average global growth rate, [the global market will post a growth of] about 7 percent CAGR [in 2022] and the same can be applied for UAE,” said Shastree.
Jewellery demand
The UAE sees huge volumes of gold, diamond and gemstone imports and exports every year, making it an ideal shopping hub for jewellery fans, especially tourists and expats who come from India, Pakistan and the Philippines. UAE nationals are also among the major jewellery consumers.
“Over the past decade, we have witnessed interest from Chinese, Russians, as well as from [European] buyers. [But] the demand took a severe hit because of COVID-19, but we are slowly seeing this demand coming back with the lockdowns being lifted and travel resuming,” said Shastree.
Gold losing shine
During the pandemic, the yellow metal fell out of favour with retail buyers, owing to the soaring prices and coronavirus restrictions that banned travel, weddings, festivals and other huge gatherings.
According to the World Gold Council (WGC), global gold jewellery consumption plummeted to $29 billion during the first half of 2020 and started to go up to $50.7 billion in the first half of 2021. However, consumption levels this year are still lower than in the same period in 2019, prior to the coronavirus pandemic.
“Weddings are a major occasion when gold jewellery is purchased. Due to the lockdowns enforced by the pandemic, we saw a sharp decline in the number of weddings that took place last year. Even this year, we aren’t seeing that many weddings and other events have toned down significantly. This has led to the decrease in demand for gold jewellery in this market,” said Shastree.
Diamonds and gemstones, on the other hand, have held up relatively well compared to the yellow metal mainly because consumers continued to buy luxury pieces for personal and aesthetic reasons.
“The majority of gold jewellery is bought during weddings, whereas diamonds and gemstones are bought for daily use or other occasions,” Shastree said.
“We saw people with disposable income really venturing into jewellery purchases and there are several retailers that will agree to this.”
However, Shastree estimated that demand for gold will bounce back soon, given that the massive vaccination drive, lifting of travel restrictions and the upcoming Expo 2020 will “bring in a huge influx of visitors into Dubai.”
(Reporting by Cleofe Maceda; editing by Seban Scaria )
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© ZAWYA 2021
