Jewellery Demand in Middle East Falls 12 Percent Due to Soaring Gold Prices

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Gold jewellery demand in the UAE fell 21 per cent in the third quarter of 2019 to 5.4 tonnes due to strengthening of the UAE dirham and high gold prices, World Gold Council said on Tuesday.

“With their local currencies pegged to the US dollar, consumers in both the UAE and Saudi Arabia were exposed to the full rise in the international gold price. The higher gold price was the primary reason for weaker demand, but consumer sentiment was also depressed due to concerns over regional economic growth and security,” the Council said in its quarterly report.

Gold prices had surged to $1,500 per ounce, which forced the shoppers to postpone their purchases.

Overall demand, in the Middle East and worldwide also fell due to global uncertainties and trade wars.

Demand for jewellery across the Middle East fell 12 per cent to 35.3 tonnes, with nearly all markets seeing significant declines.

Jewellery demand fell 16 per cent year-on-year in Q3 to 460.9 tonnes, its lowest level since Q2 2010  when it hit 422.8t tonnes.

“Consumers were deterred from making fresh purchases during the quarter as the price rally – which began in June – gathered momentum. The quarterly average gold price in Q3 was $1472.47 – 21 per cent or $259.3 an ounce higher year-on-year. This price pressure was exacerbated by concerns over the health of the global economy, which encouraged many consumers to moderate their buying plans. Bright spots were few and far between, with most markets seeing significant y-o-y declines, particularly in Asia and the Middle East,” World Gold Council said.

Indian jewellery demand of 101.6 tonnes was almost a third lower year-over-year due to weaker consumer sentiment.

The demand was dented by surge in domestic prices and 2.5 per cent rise in the customs duty on gold to 12.5 per cent. But wedding-related purchases provided some support during the quarter.

Jewellery demand in China declined 12 per cent year-on-year in Q3 to 156.3 tonnes. This is 10 per cent below the five-year quarterly average of 173.5 tonnes and the fourth consecutive quarter of year-on-year declines. “Concerns over the health of the Chinese economy, as well as rising inflation, meant that consumers prioritised spending elsewhere,” it said.

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