Not shining too bright

Not shining too bright

With gold prices increasing and consumers tightening their purses, is the yellow metal losing its luster?

February 2, 2009 12:33 by Aarti Nagraj

The financial crisis’ latest victim seems to be gold. According to reports, there’s been a drop of around 14 percent in the demand for gold in the UAE.

In Abu Dhabi, the volume of gold jewellery sales fell 70 percent in January, thanks to decreasing consumer buying.

Tushar Patni, the chairman of Abu Dhabi Gold and Jewellery Group, told Reuters that a quick recovery in jewellery sales also looked unlikely. He said thanks to job losses, many Asians – traditionally big buyers of gold– have left the city, and others have become more cautious due to the gloomy market conditions.

And gold prices are also constantly increasing. Prices in January averaged around AED 100 a gram, up about 1 percent from December, Patni said.

The situation looks similar in Dubai. The Dubai Gold and Jewellery Group, which represents more than 700 retailers, decided not to participate in sales promotions during the Dubai Shopping Festival this year, after small gold retailers said they could not afford to offer any discounts.

“We were going to lose more than Dh50,000 a month, had we taken part in the festival, in addition to the losses that we have already made over the past couple of months,” a small shop owner at the Dubai Gold Souk told The National.

But offers from big retailers are still continuing – the World Gold Council has teamed up with Damas to give away 20kg of gold in a promotion during the festival. Pure Gold Jewelers is offering 55 percent discount on its diamond collection, along with a free solitaire ring in 18-karat gold. For every AED 500 customers spend on jewellery at Joy Alukkas, they can enter a draw to win a BMW, and Atlas Jewellery is giving away 101 gold sovereign coins.

Will these promotions persuade people to buy jewellery? Or do retailers just have to sit tight and wait for the slowdown to end?