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Is it the right time to buy gold?

Gold drifted down on Wednesday in a technical correction. That came after bullion touched two-month highs at $1,219.43 earlier in the week, buoyed by a weaker dollar and uncertainty over the policies of US President Donald Trump.
Spot gold fell 0.4 per cent to $1,204.21 per ounce by 1122 GMT. Gold finished last week up one per cent for its fourth straight week of gains and longest consecutive string of weekly increases since July.
The metal has rallied about eight per cent since mid-December, fuelled by worries over Trump's policies. Gold is often seen as a safe-haven investment in times of geopolitical and financial uncertainty.
In Dubai, the price of 24ct gold dropped to Dh145.75 per gramme, from 146.75 per gramme on Tuesday.
Spurred by robust sales growth in last quarter's Diwali season and higher demand during the ongoing Dubai Shopping Festival (DSF), jewellery retailers are expecting a rebound in growth in 2017.
"2017 opened with a very positive note for jewellers as they are witnessing an impressive sale season during the Dubai Shopping Festival," says Tawhid Abdullah, chairman of Dubai Gold & Jewellery Group (DGJG).
According to World Gold Council (WGC), investors around the world returned in large numbers in 2016 to the gold market, as a combination of macroeconomic drivers and pent-up demand kept interest in gold high.

The gold price had a strong performance in 2016, rising close to 10 per cent in US dollar terms, and the price has gained more than five per cent since the US Federal Reserve (Fed) increased rates in mid-December, says WGC.
Latest data from WGC shows global gold demand fell 10 per cent in Q3 of 2016 to 992.8 tonnes. Gold jewellery demand fell 21 per cent year-on-year to 493.1 tonnes. Gold jewellery demand in the UAE fell 23 per in the third quarter of 2016.
Bullish on bullion
The WGC remains bullish on the yellow metal's fortunes this year. "Looking ahead, the fourth quarter - having started on a stronger footing - should see a recovery in the jewellery sector. The October drop in the gold price was fortuitously timed," WGC says in its quarterly report.
In a latest report outlining the market trends in 2017, the WGC says not only gold will remain highly relevant as a strategic portfolio component, but also major trends will support demand for gold throughout 2017.
The report further says that fear of currency depreciation will fuel the appetite for gold as safe haven.
"In fact, over the past century, gold has vastly outperformed all major currencies as a means of exchange. One of the reasons for this is that the available supply of gold changes little over time - growing only two per cent per year through mine production. In contrast, fiat money can be printed in unlimited quantities to support monetary policies. This difference between gold and fiat currencies can drive gold investment demand as investors seek to preserve capital from depreciating currencies," it says.
Dubai city of gold
Leading Dubai retailers say that the drop in the gold prices in the final quarter of 2016 prompted a sales growth as consumers are viewing it as a buying opportunity. Jewellery traders are optimistic that demand growth will gain momentum and will remain strong throughout the year.
Retailers Khaleej Times spoke with unanimously rule out any negative impact on sales even if an additional five per cent tariff is imposed on imported jewellery.
As part of a GCC framework, the UAE imposes a five per cent duty on wholesalers that import jewellery. However, individual emirates such as Dubai and Sharjah offer rebates.
"The five per cent duty will not have a major impact on jewellery sales as a majority of the jewellery sold in the UAE is locally manufactured. Also, in spite of the five per cent levy, the products will still be cheaper than the prices in the sub-continental countries," says Shamlal Ahamed, managing director - International Operations at Malabar Gold & Diamonds.
Karim Merchant, CEO and managing director of Pure Gold Jeweller, says that it will, in fact, strengthen the local manufacturing. "If more locally manufactured jewellery is sold, it will not have an impact on sales. Imported jewellery, on the other hand, will become more expensive for consumers if the retailer passes on the cost to the consumer. In our case, we will focus more on local manufacturing," he says.
"As a trade body, DGJG welcomes all positive initiatives by the Dubai government to streamline its economic policies with the federal as well as the GCC authorities. We are certainly hopeful that Dubai will remain at the forefront of the jewellery business by offering the world's best designs at the most affordable prices both at the wholesale and retail level," says Tawhid Abdullah.
"Dubai is the hub for jewellery in the region and will continue to be a compelling proposition given the purity of gold, exquisite range of designs and competitive pricing," he says.
John Mulligan, head of Member and Investor Relations at the WGC, says any new levy on imports may make locally produced products more attractive. "Dubai has the reputation for catering for the widest set of international and cultural tastes and imports jewellery from a wide range of locations, so it may be a challenge for the local market to maintain this level of choice if margins are not to be squeezed further," he says.
 
 
According to government data, gold represented Dh75 billion of Dubai's total foreign trade in the first six month of 2016. Diamonds reached Dh51 billion worth of trade, while jewellery was valued at Dh34 billion.
For a common consumer, Dubai gold is much more attractive for its purity, standard, variety and competitive pricing compared to other markets. A large population of expatriates from more than 180 nationalities living in the UAE prefers to buy gold in Dubai rather than their own countries.
"First of all gold is cheaper in Dubai. And more, in Kerala, I find limited design options but here in Dubai, I can choose designs from all over the India and beyond. like Singapore," says Kavita Korah, a sales executive.
Many consumers are least concern about the price fluctuations, they simply love the designs and follow the trend. "I am not an investor, I buy jewellery to wear and I am not ready to compromise on quality. Here in Dubai I find the best quality and variety of designs. I don't mind paying a premium, if I get what I like," says Veena Kurian, a housewife.
"For every marriage in India, my relatives want me to purchase and get jewellery from here. In Dubai, I trust jewelers - when they say it is 22k, then it is 22k without any doubt," says Tauseef Ahmed, a salesperson who has been living in Dubai since nine years.
- riaz@khaleejtimes.com