By Summer Said
Dubai retailers and wholesalers warn sales will suffer if price continues to rise.
High prices could scare off gold jewellery buyers in Dubai if the price rises above $900 an ounce, retailers and wholesalers in the Gulf Arab trade hub for the precious metal said.
Dubai's bullion sellers said key demand from Indian expatriates in the booming emirate and from leading importers in the Indian subcontinent had fallen in recent weeks despite the wedding season that begins around mid-January and lasts until the end of February.
"If the price goes above $900 an ounce again and stays there, we will see further drops and those buyers will take a while to adjust," a Dubai wholesaler told newswire Reuters in a series of interviews, mostly on Saturday.
Gold surged to a historic high of $914 an ounce on Monday, as investors rushed in to buy the metal on further weakness in the dollar and expectations of a sharp cut in US interest rates.
The multi-year high prices have weighed on sales of the precious metal for jewellery in Dubai, deterring buyers and depressing their value by 14% for 2007, Tawhid Abdullah, managing director of the Dubai Gold and Jewellery Group said.
"Further hikes will hit the sales of gold jewellery here... we had seen some buyers returning to the market when prices went below $900 an ounce," Abdullah said.
Spot gold closed at $884.20 on Friday in Europe.
The precious metal rose more than 30% in 2007 amid safe-haven buying due to credit market turmoil and worries about the health of the US economy, which sent the dollar to record lows, as well as record high oil prices.
Dubai is a long-established market for gold bullion and wholesale and retail jewellery, where the trade is fuelled by strong demand from the Arab world and India, the world's number one gold market.
Recent drops in sales value have deepened anxieties among traders that the emirate may lose its lustre as a regional gold hub.
Wholesalers and retailers say if prices remain below $900 for a few months, Dubai will see a reversal of the sales drop in the fourth quarter of last year.
"Physical offtake in Dubai and the region will become very solid again when people adjust to the $880/890 levels without being hit with another rise," a wholesaler said.
"The market here has been relatively strong compared to what is happening in other international markets, but we don't want to see prices nearing $1,000," he added.
Record high prices have led to a sharp drop in the flow of scrap gold coming into Dubai in recent weeks as jewellery owners hoped for further prices hikes, industry experts said.
The rally of the precious metal has also frightened consumers in India, which absorbs 30% of global demand.
Tax-free jewellery in the UAE gold souks and shopping malls draws Gulf Arab and Western tourists.
Last year's demand for jewellery and investment in the UAE increased by almost 12% in volume and 20% in value from the year before as tourism grew, the World Gold Council has said. (Reuters)For all the latest retail news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.