Perhaps the latest wave of price crash came a bit too late for jewellery aficionados who have been cooling off after a buying spree on Akshaya Tritiya — considered as an auspicious day to buy the yellow metal — on May 13.
But jewellery outlets are upbeat. They expect buyers to come back in droves soon after waiting for further drop in the next few days.
Impacted by a firmer dollar even as holdings in exchange-traded funds fell to the lowest in over four years, spot gold fell to as low as $1,374.99 an ounce, its cheapest since April 18 when gold was at $1,335. Thursday’s fall was the biggest one-day fall in three decades, crashing through $1,400 an ounce as investors faced with a bear market turned to panic selling. Gold’s fall of 13 per cent since April 11 was the biggest two-session decline since 1980.
In Dubai, the price of 22k gold dropped to Dh158 per gram on Thursday, down Dh14.75 from Dh172.75 a year ago. The yellow metal has now shed around 30 per cent of its value since its all-time high on September 6, 2011, when it soared to $1,923 per ounce.
Joy Alukkas, Chairman of Joy Alukkas Group, said the dip in gold prices had triggered over 70 per cent surge in gold sales over the past four weeks compared to the same period in 2012. During Akshaya Tritiya, most jewellery outlets witnessed an upswing of 15 per cent.
“Gold price tend is quite unpredictable. But this is an opportune time to buy,” said Alukkas said.
Shamlal Ahmad, Managing Director International Operations, Malabar Gold, said UAE jewellery shops were witnessing up to 100 per cent jump in sales over the past one month since gold crash-landed at $1,335 per troy ounce on April 16.
Ahmad said the latest fall did not spark the same degree of buying frenzy on Thursday. “Sales were as usual during the day. May be people expect to see further drop in the coming days and waiting,” he said.
The latest round of price drop came as World Gold Council reported that global gold demand declined 13 per cent in the first quarter due to a massive liquidation in exchange traded fund while demand for gold in jewellery rose 12 per cent.
“Jewellery demand across the Middle Eastern markets experienced a revival in the first quarter,” the WGC report said.
The UAE recorded gold sales of $1.14 billion in the first quarter 2013, up eight per cent in value over the same 2012 quarter. Overall in 2012, the UAE saw gold sales of $3.36 billion, accounting for about one-third of the $10.1 billion in gold sales in the entire Middle East region in 2012, WGC data shows.
Steve Land, Portfolio Manager, Research Analyst at Franklin Equity Group, told Khaleej Times that the main drivers of the gold price crash appear to be a sell-off in gold-backed exchange traded funds and physical gold investments.
“There has been a dramatic reduction in the amount of gold held in global gold ETFs since February this year that has effectively moved a sizable quantity of gold out of the investment market,” said Land.
Global ETP holdings have tumbled 16 percent in 2013 after rising every year since the first product was listed in 2003.
Land said other factors driving the fall include fear of Cyprus spreading, a strengthening US dollar, improving equity markets/global economy and limited signs of inflation globally.
“Although gold prices are nearly impossible to forecast, we believe there are still compelling reasons for having exposure to gold through related equities in the current environment. Gold acts as a store of value in times of uncertainty and may act as a potential hedge against a weak US dollar or rising inflation,” said Land.
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