Gold price dip seen helping to raise jewellery sales

posted on 25/07/2002: 25 views

Dubai's jewellery traders, languishing from a sales slump triggered by a sharp price rally this year, said the sudden slide of the yellow metal in the past two days from a two-year peak of US$336 to US$308 is auguring well for an earlier-than-expected recovery.



Traders, who have been bracing for a summer lull that is expected to continue till mid-September, said they expect jewellery sales to pick up substantially in the post-holiday period if the current downward trend of the yellow metal presists. Gold, on a continuous upswing since January this year, has been hovering over US$315 per ounce for most of the peak pre-holiday season when expatriates heading home usually make bulk of their jewellery purchases.



While some leading jewellery outlets reported up to 20 per cent business shrinkage, quite a few said despite the high gold prices they could maintain sales volumes at the same level as last year during the pre-holiday peak season stretching from May-end to the first week of July. Yesterday's sudden price dip has driven down 22-carat jewellery prices at Dubai's Gold Souk from Dh36.25 per gramme to Dh34.75 per gramme in two days. Compared to the price a year ago at Dh29 per gramme, although this price is still higher, it comes as a respite to buyers and an unexpected summer boon to outlets, an analyst said.



A leading trader said his outlets in Dubai posted a sales drop of some 20 per cent in June when total sales dipped from 83 kilos to 58 kilos. "This trend persisted in July too," he said. Analysts said individual promotions launched by jewellery outlets in some major markets with the exception of Dubai are helping some leading traders to weather the summer drought. In Dubai, traders have come to an agreement to desist from individual promotions that used to heavily reduce their profits. Unlike last year, when some leading traders defied the dictate of the Gold and Jewellery Group and launched their own promotions, this year there has been a strict adherence to the group's summer promotions offering buyers a chance to win 10 kilos of gold.



The promotion offers shoppers the opportunity to win instant scratch-and-win prizes, in addition to one kilo of gold every week. Shoppers spending Dh250 at participating Gold & Jewellery Group outlets can take part in the promotion, which is giving away a grand total of 10 kilos of gold worth Dh380,000. Scratch-and-win prizes will range from Dh100 to Dh1,000 gold vouchers and are redeemable on the spot for jewellery from the participating outlets.



Analysts said in the long term, the price factor will not impact the offtake of gold in Dubai. Since January, jewellery demand in Dubai has been under increasing pressure with jewellery outlets recording a sustained sales slump. "In seven months, there has been a 15 per cent increase in price that has certainly impacted demand. But in the coming months, as customers get used to the prices, market will stabilise. In the current global market scenario, when stock markets are crashing, it is inevitable that there would be increased investor confidence in the yellow metal," another jewellery trader said. (The Khaleej Times)

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