Gold bars and coins are in low supply at gold souqs across Dubai, as retail buyers are scrambling to accumulate as much yellow metal as they can in anticipation of a further hikes.
Gold prices pushed to new heights on Tuesday as investors digested the possible consequences of the lowered US credit rating and Europe's debt crisis on a slowing global economy.
Some investors view gold as a safer bet amid rising worries about debt levels of the major economies and uncertain stock markets.
Gold futures rose $29.80, or 1.7 percent, to $1,743 per ounce after setting a record price of $1,782.50 earlier in the day.
Emirates 24|7 spoke to a cross section of wholesale and retail dealers to capture the mood in the local market.
Pearlju Baby Chungath, Owner of Chungath Jewellery at Karama Center, said: “Most customers and retailers are trying to buy gold bars and coins. There is virtually no supply of 50 gramme and 100 gramme gold bars in the market.
It seems wholesalers are releasing only one or two bars per day to their regular customers. If we have demand for 50 gold bars, our wholesaler is giving only one or two pieces per day. Even getting the second piece is difficult.”
Wholesale suppliers like Pamp Gold have reduced supplying gold bars and coins, in anticipation of higher prices in the coming days, and they are charging a premium of Dh 100 to Dh 150 per bar.
The demand is so high that at the Karama Center, where many Indian jewellers operate, whoever had stock of gold bars and coins would have made minimum sale of five kilogram each, said Baby, who owns seven more branches in India.
While small denomination coins have disappeared from the market, 10 tola bars and 1 kg gold bars are available, at a premium price.
Traders are reluctant to release more gold because they feel prices would continue to go up and a decline in gold price is possible only if the US Government decides to sell a part of the gold reserves, to confront the financial crisis.
Amid the euphoria of rising prices resulting demand for gold bars and coins, the demand for ornaments have gone down, making many small retailers not so happy.
“Market price will go up further. Traders are selling gold bars at a premium of $50 per ounce. Normally the profit margin on a gold price is Dh 20, now traders are charging Dh 100 to Dh 150 more than the market value,” said another trader.
Varghese EA, Showroom Manager, BRR Jewellery said traders anticipate further hike in gold price and wholesalers are not selling gold bars and coins because they cannot replace the sold stock with new stock, due to sudden price fluctuations.
“The main business in the showrooms is gold bars and coins, which have bar, are now charging a premium. We have lot of inquiries for gold bar inquiries and traders are charging a big premium for selling gold bars and coins.”
Abdul Salam, Group Executive Director, Malabar Gold said there has been an increase in physical demand for gold in the last couple of days, causing a decline in physical gold supply from wholesalers.