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Gold Jewelry Demand in the UAE Declines by 15% in the Third Quarter

In the third quarter of 2023, the UAE experienced a significant 15% year-on-year drop in gold jewelry demand, with consumption falling to 9 tonnes. This decline is largely attributed to the exceptional demand observed during the same period the previous year, when markets fully recovered from the pandemic’s impact. Data from the World Gold Council’s latest report reveals these insights.

Optimism for a Fourth Quarter Sales Recovery

Despite the Q3 dip, gold jewelers in the UAE are optimistic about a potential recovery in sales during the fourth quarter. Traditionally, the last quarter of the year is considered the peak season for gold and jewelry sales in the UAE. This is due to various festivals and the increased influx of tourists during this period.

Nine-Month Performance Shows a 19% Decrease

During the first nine months of 2023, gold jewelry sales in the UAE recorded a nearly 19% decrease, with sales amounting to 29.5 tonnes compared to 36.4 tonnes during the same period the previous year.

Notable Surge in Gold Bars and Coins Demand

Conversely, there was a remarkable 55% surge in demand for gold bars and coins in Q3 2023, reaching 3.3 tonnes compared to the same quarter in the previous year.

Last Year’s Economic Resilience and Recent Price Movements

The surge in demand in the previous year can be attributed to the UAE’s robust economic recovery, with both local and global economies fully reopening post-pandemic. The UAE economy exhibited exponential growth at a rate of 7.9%. This growth was driven by an increase in tourist numbers and heightened local consumer spending.

Recent increases in precious metal prices were prompted by the outbreak of the Middle East conflict between Palestine and Israel. While gold prices briefly touched $2,000 per ounce, they later fell below this psychological threshold.

Lock-In Options Ahead of Festivals

Notably, a few weeks before the increase in gold prices, UAE residents explored ‘lock-in’ options, especially ahead of the Dhanteras and Diwali festivals. Some jewelers reported a substantial 200% increase in comparison to the previous year.

Impact of Gold Prices on Jewelry Purchases

John Paul Alukkas, Managing Director of Joyalukkas Group, emphasized the significant influence of gold prices on jewelry purchases in the UAE. He highlighted the direct impact of price fluctuations on consumer behavior. When gold prices are lower, consumers tend to increase their jewelry purchases, perceiving it as an opportune time to buy. Conversely, higher gold prices often result in reduced purchases due to cost concerns.

Adaptation to Price Fluctuations: Gold Jewelry Demand

Alukkas underscored the importance of jewelry retailers adapting to these price fluctuations by offering promotions, discounts, or diversifying their product ranges to accommodate varying consumer sentiments influenced by gold price movements.

Resilient Jewelry Demand Despite Elevated Prices

Despite the elevated gold prices, the Q3 Gold Demand Trends report from the World Gold Council indicated that jewelry demand remained resilient. Nevertheless, there was a slight softening in jewelry consumption, with a 2% year-on-year decline to 516 tonnes. This decline was primarily due to increased cost of living pressures on consumers in many global markets.

Central Banks and Gold Demand

The Q3 Gold Demand Trends report also unveiled that central banks had the third-strongest quarter of net buying, reaching 337 tonnes. While this fell short of breaking the Q3 2022 record, the year-to-date demand reached a new record of 800 tonnes. Central banks’ consistent strong buying trend is expected to persist throughout the year, indicating a robust annual total in 2023.

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