In its latest report, ABN Amro said gold’s inability to move above $1,800 an ounce is taking its toll and its prices will remain under pressure.
“So far this year, gold prices have declined by 7.5 per cent. The gold price outlook remains negative. We keep our year-end forecast at $1,700 per ounce and end of 2022 at $1,500 per ounce,” ABN Amro senior precious metals strategist Georgette Boele said in a report.
Since June, gold has been stuck in a downward trend, with stronger US dollar and higher US Treasury yields keeping pressure on prices.
Spot gold was up 0.6 er cent at $1,793.82 per ounce by 1741GMT on Friday, after rising as much as 1.7 per cent earlier in the session. Prices have risen 1.4 per cent for the week. US gold futures settled up 0.8 per cent at $1,795.80 per ounce.
In a research note, Citigroup said gold price is likely to struggle near or above $1,800 per ounce in the short-term period.
“Spot bullion trading remains lacklustre despite robust US inflation data and increased investor concerns about stagflation risk... price action appears to struggle near or above $1,800/oz. Several forces might be driving what seems to be weaker bullish sentiment for gold — certainly versus 2019 and 2020,” according to Citigroup research.
Leading jewellers termed the lower gold prices a good omen for their business and said buyers are returned to the market. They said Expo 2020 will also drive growth in jewellery business as six-month long extravaganza will attract millions of tourists and visitors from across the world.
“Yes, definitely there is an increase in sales after the gold price decline. Demand has significantly increased over the last few weeks, and we have shoppers returning to the store each time there is a dip in gold price,” Abdul Salam KP, vice-chairman of Malabar Group, told Khaleej Times.
He said Diwali and the subsequent six months are all about festivities and celebrations.
“With the ease of restrictions and tourists returning, we expect a significant transformation in the market in the coming weeks. The overall consumer sentiment is about celebrating important festivals with family and friends as well as being part of events like weddings and related celebrations, that have become more frequent in the UAE,” Salam KP said.
Expo 2020 impact
He said Expo 2020 is another influential factor that is expected to have an impact on the festive sales as well.
“All in all, we expect the next six months to be exceptionally good for the jewellery retail trade as well as the economy in general,” he said.
In reply to a question, he said 2021 has been a good year so far. “With gold prices dropping, favourable market conditions and shoppers from the sub-continent returning, we expect to close the year as well on a good note,” he said.
With regards to gold prices, he said most estimates suggest gold price stability at around the $1,800-plus level, which means the gold rate in Dubai will be in the Dh205-Dh210 range.
“In the last 22 months, gold has surprised everyone by sticking to these levels after hitting an all-time high of $2,067 an ounce in August last year. Around $1,800 could be the new normal for gold,” he said.
2021 good for jewellery business
John Paul Alukkas, managing director — International Operations, Joyalukkas Group, echoes the similar views and said lower gold prices will boost jewellery business in coming months.
“The year 2021 to-date has been good for us, we are seeing a significant growth compared to the earlier year and our outlook for the coming year is also very positive,” Alukkas told Khaleej Times. He said the magnificent Expo will also surely bring in a huge number of tourists which also should help create more demand for gold and jewellery.
“We are seeing a positive outlook all over the world and this good sentiment will be beneficial to all types of businesses. Gold price is expected to be in the range of $1700-$1900 next year and the consumers should get the benefit of lower prices,” he said.
In reply to a question, he said jewellery shoppers love to take advantage of the price fluctuations and this just goes to prove the value of gold and jewellery as a solid investment in addition to its charm as an adornment.
“We are seeing the usual spike in sales because of the drop in gold prices. Now that the impact of Covid is minimum and things are getting back to normal, we are very positive about our sales during the key festivals and celebrations i.e. Diwali, Christmas and the New Year,” Alukkas said.
“We will see very good sales ahead of Diwali because this is usually biggest gold purchase time for all the Indians. Everyone is now eager to celebrate with their festivals the way they were used to prior to the pandemic,” he said.
“Other than this, the ongoing Epxo is bringing in a many tourists to the UAE which will also help in creating more demand for gold and jewellery. At Joyalukkas, we are ready to meet this demand with exciting collections and attractive promotional offers,” he added.
Most lucrative asset
Ramesh Kalyanaraman, executive director, Kalyan Jewellers, said gold has always been a preferred buying option for most Asian and Middle Eastern communities. In the post pandemic era, it has also emerged as the safest and most lucrative asset class.
“Early indicators suggest that the resilience of the jewellery sector will continue, especially in the context of wedding jewellery and festive season purchases,” he said.
“In the Middle East, we have witnessed a significant improvement in customer sentiment in the period between Julyand Sept, resulting in a revenue growth of 60 per cent, when compared to the same period last year. With the continued easing of travel restrictions and with the festive and wedding season starting now, we are continuing to witness encouraging trends and a significant pace of demand recovery.
“Our customer base is a healthy mix of both millennials as well as seasoned buyers — while the former prefer to buy light weight jewellery like earring, rings or pendants in gold or diamonds during the festive season, the more seasoned buyer looks at our rate protection or pre-booking option as a means to buy occasion-specific, heavier jewellery sets,” he said.
To a question about sales trend this year, he said buyers returned to the market.
“After a slow start in the beginning of this financial year, we have continued to witness robust momentum in both footfalls and revenue across all our markets in the Middle East. There has been a greater acceptance of the ‘new normal’, leading to increased walk-ins and more time spent at our showrooms by customers,” he said.
He said a significant number of weddings have been rescheduled for the later part of this year and early part of next.
“We continue to be encouraged by the current trends, with revenue growth of 60 per cent, when compared to the same quarter last year. This growth is driven by same store sales, as we have not added any new showrooms in the region. We are positive and highly optimistic, and believe the pace of demand recovery will continue to speed up in the coming months,” Kalyanaraman concluded.
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