Abu Dhabi gold sales plummet by 40%

Gold retailers and jewellers in the capital have reported a 30 to 40 per cent decline in sales due to rising prices in the international market and growing inflation.

A number of leading retailers told Emirates Business sales have been dropping rapidly since the fourth quarter of last year when the gold price per gram started rising from its range of Dh70.

They blamed the weakening dollar and accelerating oil prices in the international market for the lull in sales and plummeting profits. One of the leading jewellers in the UAE, Damas, has predicted the price of an ounce (31.1g) of gold will double from the current $900 (Dh3,306) by the end of the year if the dollar continues to drop or does not improve.

Another retailer, Ajanta Jewellers, said gold prices will increase by 20 to 25 per cent from the current rate to $1,150 and $1,200 per ounce by the end of 2008.

However, some jewellers believe it is speculative to try to predict prices due to market fluctuation. But most of the gold dealers, directly involved with customers, interviewed in the capital, see further loses if the market situation remains as it is.

“Our sales have dropped from 30 to 40 per cent since the gold prices started rising. There are three main reasons for the upsurge. One is the overall growing inflation, the second is the accelerating rise in gold prices and the third is the fluctuating prices that results in people not being able to decide when to buy jewellery,” said Tusar Patni, owner of Ajanta Jewellers.
 

According to him, the deteriorating situation in the market has also forced retailers to raise prices. Patni said the expenses of jewellers have increased due to inflation and the corresponding price increases are driving away customers.

 

 “We cannot survive on previous prices with so many expenses involved in the business. Prices of things are fast growing, forcing us to increase our investments but with very little return,” he said.

 

“Basically it [the situation] has to settle down somewhere. I hope to see things improve in the third quarter of the year. If things continue the way they are, the gold price per ounce will be between $1,150 and $1,200 by the end of the year,” he said.

Ghanem Kheirallah of Damas said they have suffered a 30 per cent dive in their sales since the fourth quarter of 2007. He said: “The entire market is suffering a 30 per cent or more drop in sales. It is not only the high gold prices, but the record inflation as well that keeps customers away.”

He believes the market situation is directly linked to the dollar’s performance – the more it drops, higher the gold prices soar.

Al Jazira Jewellery, another leading gold and jewellery retailer in the capital, has also reported a 30 to 40 per cent drop in sales.

Abdullah Omar, a senior sales executive of Al Jazira, said there has been a sharp decline in the number of customers. However, he added, the number of customers re-selling gold and jewels has seen an upsurge.

He said: “Now most of our customers come to us to sell their jewels rather than to buy. A gram of gold they bought for Dh70 is now sold for more than Dh110. They are making money. The number of customers has dropped from 30 to 40 per cent and might further drop due to high prices of gold and severe inflation.
 

Another reason is that the number of new designs has also dropped, leaving fewer choices for customers. This is also due to expenses involved in designing, making and the materials costly.”

 

Ajay Kumar, branch general manager of Sky Jewellers at the Hamdan Street branch, said both sales and profits have dropped almost 25 per cent compared to last year. Similarly, he added, the price of gold has increased by 50 per cent.

 

However, he said, currently business is returning to normal due to the annual vacation season.“Most of our current customers are those who are going home on their annual vacation,” said Kumar.