Gold retail volumes in Dubai fell in January as consumers remained sceptical about the yellow metal's fluctuating price level, retailers said.
Jewellery sales in Dubai have seen a run of declines since the end of 2008 due to the economic crisis coupled with record high gold prices.
"No we are seeing the price settle down a bit, but our sales are still down because consumers believe that the price will fall even further in the coming months," said Raiju KR, Showroom Manager at BRR Jewellery, a gold retailer in Dubai's old gold souk.
Spot gold prices steadied to hover near $1,080 per ounce yesterday after posting a third straight week of declines as investors remained wary of gains in the dollar, which weaken bullion's appeal as a currency hedge.
"Investment demand that was spotted as the prima-facie reasons behind the rise in gold prices last year, has dropped by almost two per cent globally this month," said Pradeep Unni, Senior Analyst and Trader at Richcomm Global Services in Dubai.
If physical and retail demand continues to slump on a global level excess gold supply may reach 704 tonnes by the end of 2010 compared to the excess of 397 tonnes of gold in the 2009, Unni added.
"In addition to the surge in gold mine supply, the manifest surge in scrap supplies, triggered by high gold prices has been the pivotal reason for this surge in supply."
This year, Dubai's Gold & Jewellery Group, an informal body representing more than 700 gold retailers has decided not to take part in the biannual shopping festival promotions, retailers said. This is the second consecutive year the emirate's Gold & Jewellery Group had decided not to take part in the festival as further discounts were seen as damaging to profits, one gold trader said.
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