Gulf jewellery sales suffer from gold’s rich streak

Alamy via Reuters

• Gold price increase
• Indian import duties reduction
• Impacts gold jewellery demand

High gold prices amid widespread geopolitical uncertainty have dented jewellery sales in the Middle East this year. The trend is expected to continue in 2025.

India’s sharp reduction of gold import duties in July, from 15 percent to 6 percent, boosted domestic sales but hit Middle Eastern merchants, according to industry insiders. 

“After a weak 2024 we remain sceptical about the growth prospects for gold jewellery demand in the region,” says London-based Kirill Kirilenko, a senior analyst for CRU, a global commodities intelligence company.

With high gold prices predicted next year, this will “make gold jewellery less affordable,” he adds. 

Gold prices rose 0.5 percent on Thursday at the time of writing in holiday-thinned trade to $2,627.62 per ounce, while markets await clues on the Federal Reserve’s 2025 rate plan and tariff policies from the incoming Trump administration. This is still 27 percent higher year-on-year.

Delhi’s move on duties will again convince Indian shoppers travelling to Dubai and other major Middle East cities to stay at home and buy local products. 

This would further weaken demand in the Mena region.

“Gold has had a very strong year,” says Juan Carlos Artigas, global head of research at the World Gold Council. “It’s up almost 30 percent year to date.”

Key to driving the traditional safe-haven asset has been escalating global tensions and economic disruptions, stemming from the wars in Ukraine and Gaza in 2024.

Asian investors, especially from China and India, supported the market in the first part of the year. Western investors followed in the third quarter as historically high interest rates started to fall, according to Artigas.

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Central banks have also played a part in boosting gold reserves.

“The magnitude of purchases has increased over the past couple of years and remains well above average,” Artigas says, adding that he expects that to continue into 2025.

The Central Bank of the UAE, for instance, upped its gold reserves by 27.8 percent in the first nine months of 2024, from AED18.147 at the end of last year to AED23 billion in the third quarter of 2024, according to official statistics.

But there is an element of risk. The rush for gold could ebb away if conflicts in Ukraine and the Middle East are resolved, reducing geopolitical uncertainty. Another crucial factor is whether interest rates stall or go up again.

For the Middle East, the world’s third largest consumer of gold after China and India, that means important shifts are underway.

Traditionally consumers, rather than investors, were the backbone of the gold market in a 60-40 percent split.

Spending on gold jewellery exceeded investor demand for bars and coins. But that is changing, according to ​​​Andrew Naylor, World Gold Council’s Middle East head. 

“When we started our data series in 2010, bar and coin demand accounted for much less of overall demand,” he says. But now both segments of the market have taken a hit, with the UAE standing out from the crowd. 

“Bucking the regional and global trends, bar and coin demand was up 5 percent in the last quarter,” he says. 

“This is likely due to a number of reasons, including the growing role of the UAE as a major international wealth management centre, and the relocation of HNWIs (high net worth individuals) to the Emirates.”  

Still, the UAE failed to avoid a slump in demand for gold jewellery, primarily driven by rising competition from India and a region-wide push into recycling. 

“That tends to increase when prices are higher as individuals want to sell and lock in profits,” Naylor says. “The Middle East has seen the largest increases in recycling activity both year-on-year and quarter-on-quarter.”