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Why UAE shoppers are buying more gold bars, coins than jewellery

Safe-haven motives kept demand elevated in the fourth quarter, although the price rise held back some investors

Published: Wed 31 Jan 2024, 6:06 PM

Updated: Wed 31 Jan 2024, 10:47 PM

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UAE shoppers bought more gold coins and bullion than jewellery in 2023, meaning buyers had a stronger appetite for investment.

According to World Gold Council data released on Wednesday (Jan 31), demand by UAE consumers for bars and coins jumped by 34 per cent to 11.2 tonnes last year as compared to demand for jewellery dropping by 15 per cent from 46.9 tonnes in 2022 to 39.8 tonnes in 2023. This took the total gold demand to 50.9 tonnes last year.

The Emirates saw consistent year-on-year growth for coins and bars, taking annual demand to a 10-year high. Safe-haven motives kept demand elevated in the fourth quarter, although the price rise held back some investors, waiting for a correction, it said.

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Gold prices see-sawed in 2023, touching as low as $1,809 in February 2023 before rising to $2,038 in May. The price gain fell to $1,817in October before rising to $2,081 in December, influenced by geopolitical issues and the US Federal Reserve decision about the rate cuts.

The UAE was also among the top countries in demand for jewellery in 2023 after China, India, the US and Turkey.

“The drop in the UAE was mainly due to the high base of 2022, which had been boosted by the post-Covid return of tourism,” the World Gold Council said.

In the UAE, per capita demand for gold was 5.07 grams in 2023, down from 5.6 in the previous year.

Globally, annual gold demand stood at 4,448 tonnes, 5 per cent below a very strong 2022. Central bank buying maintained a breakneck pace. Annual net purchases of 1,037 tonnes almost matched the 2022 record, falling just 45 tonnes short.

Gold exchange-traded funds (ETFs) saw a third consecutive annual outflow, losing 244 tonnes. The pace of outflows slowed markedly into year-end, but October’s hefty outflows dominated the fourth quarter.

Annual bar and coin investment saw a mild contraction of 3 per cent year-on-year as divergent trends in key Western and Eastern markets offset one another. Annual jewellery consumption remained steady at 2,093 tonnes, even in the high gold price environment. China’s recovery supported the robust global total.

“Unwavering demand from central banks has been supportive of gold demand again this year and helped offset weakness in other areas of the market, keeping 2023 demand well above the ten-year moving average,” said Louise Street, senior markets analyst at the World Gold Council.

Going forward, Street said that in addition to monetary policy, geopolitical uncertainty is often a key driver of gold demand in 2024. “We expect this to have a pronounced impact on the market. Ongoing conflicts, trade tensions and over 60 elections taking place around the world are likely to encourage investors to turn to gold for its proven track record as a safe haven asset,” he said.

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