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Bullish Gold Unlikely to Dent Jewellery Sales

Major gold retailers see good sales during the upcoming festive season on rising consumer confidence and renewed love for fine jewellery

Gold jewellery sales are likely to continue its strong upward trend during the upcoming festive season despite high prices of yellow metal as consumers and investors turn to the commodity as a safe-haven asset and will continue to invest in it, experts say.

Major gold jewellers and analysts said the gold prices are likely to sustain an upward trend due to geopolitical tension, uncertain economic outlook and possible cut in interest rates by US Federal Reserves in September. They are of the opinion that gold will continue its rally due to weakening US dollar and dovish signals from Federal Reserve Chair Jerome Powell.

Shamlal Ahamed, Managing Director for International Operations at Malabar Gold & Diamonds, said the surge in gold prices is a further testament to the asset's value-appreciating nature and expressed his hope that record prices will not affect the jewellery sales during the upcoming festive season.

“While the initial surge might lead to some hesitation among customers, this is often short-lived. Historically, gold prices have consistently risen, and customers tend to adjust to new pricing levels over time, recognising its long-term value and reliability. We are expecting the festive season to bolster jewellery sales, when customers typically focus on purchasing gifts for their loved ones and upholding traditions,” Ahamed told BTR.

In reply to a question, he said the first half of the year saw good sales, fuelled by a combination of consumer confidence and the dual value of jewellery as both an adornment and investment.

“We’ve also been seeing an increasing aspirational value for diamond jewellery as well. The upcoming six months are all about festivals, celebrations and weddings when we anticipate greater momentum,” he said.

Ahamed said consumers will benefit from enticing offers and exclusive collections, with jewellery continuing to serve as both a valuable investment and a key element of these special occasions.

Jewellery sales surge

John Paul Alukkas, Managing Director at Joyalukkas Group, opined that high prices makes yellow metal more attractive for the consumers and investors and the price rally is unlikely to dent jewellery sales during the festive season ahead. “With gold prices hitting new highs, it’s no surprise that this makes gold even more attractive. This spike in prices actually highlights its timeless charm,” Alukkas told BTR.

“During the festive season, we will roll out many offers and promotions to keep gold jewellery both desirable and affordable, making it convenient for customers to purchase. In fact, gold and jewellery lovers consider it a win-win: they get to celebrate in style with the latest designs, and their investment remains as solid as ever.

“Whether they’re shopping for a festive gift or treating themselves, at Joyalukkas, we make sure our buyers get exceptional value and quality. The allure of gold, combined with our exclusive festive offers, will certainly keep driving enthusiasm and sales during this vibrant season,” he said.

Alukkas said jewellery sales showed resilience during the first half despite the rising prices.

“The first half of the year has been fantastic for us at Joyalukkas, with sales booming thanks to increased consumer confidence and a renewed love for fine jewellery. Our unique designs and commitment to quality have really struck a chord with our customers,” he said.

“As we head into the second half, we move forward with optimism. The second half is when the festive season begins, and customers get to enjoy some exciting offers and promotions, so we are prepared to keep the momentum going. Our focus remains on exceeding customer expectations with our high-quality jewellery offerings, which we believe will lead to a substantial boost in sales for the remainder of the year,” he said.

Why gold rallies

Ahamed said gold prices in international markets are driven by several key factors, including economic uncertainty, central bank policies, geopolitical tensions, and other unpredictable factors. “During these times, investors turn to gold as a safe-haven asset leading to increasing prices,” he said.

Gold prices have surged more than 21 per cent this year and now hovering above the $2,500 per-ounce psychological level, hitting a record high of $2,550 an ounce globally and Dh306.75 per gramme in Dubai in August. Analysts and gold jewellers expect further increase in prices in the coming days due to geopolitical tensions and expectations around the US Federal Reserve decision to cut interest rates.

ANZ commodity strategist Soni Kumari said gold prices can hit $2,550 levels in mid-longer term, but in the near-term the market might look for an opportunity to correct.

UBS analyst Giovanni Staunovo said the US Fed chairman strongly signalled the potential for US rate cuts, indicating that upcoming economic data would determine their pace and scale, which could boost gold investment demand. He said demand for gold from central banks could also support prices.

"Central banks purchases are linked to a mandate to buy a specific amount of gold over a specific time frame ... fears of sanctions, geopolitics, ballooning debts, are likely to keep demand from central banks supported despite record high prices, in my view," he said.

Citi outlook said solid gold demand in the second half of the year could drive prices as high as $2,600 an ounce, with investors playing catch-up with the broader marketplace.

"We remain constructive on gold physical uptake over the next 12 months with a potential Fed cutting cycle and US labour market headwinds buttressing paper demand for the yellow metal," the Citi analysts wrote.

In this environment, the bank sees gold prices trading between $2,800 and $3,000 per ounce by mid-2025.

— muzaffarrizvi@khaleejtimes.com