Commodity Online
HONG KONG/DUBAI: The global economic meltdown, volatile stock markets and high bullion prices are hitting gold jewellery sales in Asia’s two largest cities—Hong Kong and Dubai.
Dubai and Hong Kong are hubs of gold trade in Asia. But April figures from both these cities indicate that jewellery sales and gold purchases for investments are falling thanks to the worsening recession.
According to the Census and Statistics Department (C&SD) of Hong Kong, the April retail sales fell 7.7 percent and bankruptcy fillings rose to 1,872, a five-year high, against the backdrop of a worsening recession. Declining sales on the consumer level are not alone, joined by a drop in international trade.
Values of Hong Kong's total exports and imports of goods fell markedly, by 21.1 percent and 22.7 percent respectively.
Retail sales of jewelry, watches and clocks, and valuable gifts fell in March by 9.7 percent, faring better than wearing apparel (-19.6% in volume) but worse than food, alcoholic drinks and tobacco (-2.5%).
In the first quarter, Hong Kong's retail sales dropped 3.9 percent by value and 5.5 percent by volume from a year earlier. Dubai, the biggest bullion market for trading gold in the Middle East, too has been hit hard by the falling sales of gold jewellery.
In March and April, gold sales have plunged by at least 50 per cent in Dubai, said Mark Robinson, a bullion analyst based in the city.
According to Robinson, gold jewellery sales are falling in big cities like Hong Kong, Singapore and Dubai because of deepening recession and uncertain market conditions. “Thousands of people are losing jobs these days everywhere. So where is the money to buy gold on these uncertain times,” Robinson told Commodity Online.
He said if stock and commodities markets do not improve, bullion trade will come down across Asia as gold sales used to be the main driver for commodities.
Report say plunging gold sales, volatility in prices and economic meltdown are also forcing several leading gold and diamond jewelers in Hong Kong and Dubai either to shut down or halt their expansion plans.
Joy Alukkas, Chairman of Joyalukkas Group, a leading India-based gold and diamond retail chain with 40 major outlets across the world, has decided to put on hold all the expansion plans of the company for 2009. “High gold prices have hit bullion trade. We will use this opportunity to consolidate rather than expand,” he said.
Earlier, the Joyalukkas Group had said that its March 2009 earnings had fallen by 22 percent. “Gold sales will now pick up only when the prices come down,” he added.
In the last three months, gold prices have been ranging between $800 and $900 a kilogram.
Jewelers like Alukkas point out that global financial crisis has badly hit gold sales and bullion markets in the United Arab Emirates (UAE) and Saudi Arabia. Rising unemployment, crash in realty prices and plunging stock markets have taken the sheen out of bullion markets in all the major cities across UAE and the Saudi Kingdom.
While gold sales in UAE cities like Dubai, Abu Dhabi and Sharja have plunged by nearly 60% for the last three months, gold trading volumes have dipped in Saudi Arabia by at least 50% in February.
Investors use gold as a safe haven in the wake of the depressing economic conditions and investments on other assets. But Robison says the surge in gold prices have ensured that people are losing their purchasing power to buy gold and jewellery items. “The fact is that increasingly people do not have any money to buy gold that is very expensive. That is the main reason for the plunging gold sales across the Middle Eastern countries and nations like India and China,” he added.
Gold sales in Dubai, known as the City of Gold, have always been dependent on tourist arrivals. Leading jewellers said every month the inflow of tourists are going down, leading to a downtrend in gold purchases.
Gold sales in Dubai's traditional jewellery market have collapsed mainly because of the decline in tourist arrivals. Local jewelers who have been waiting for a big chunk of tourists said that less and less tourists inflow to the city has badly affected the sale of the yellow metal.
Diamond World reported that India, which has been the largest importer of gold, is now looking at exporting the yellow metal to Dubai. With the global gold market making dynamic developments in the recent past, India is seeking to explore the opportunities of exporting gold to Dubai, the emerging jewellery market of the world.
