DUBAI: Retail gold sales volumes in Dubai and Abu Dhabi fell by around 10 percent on the year in October as high gold prices deterred consumers despite the Indian festive season, retailers said on Sunday.
"Ahead of Indian festival of Diwali demand is usually strong but this year prices are just too out of reach for a lot of people…we saw a drop of around 10 percent in volumes," said Tushar Patni, director of Ajanta Jewelers, one of the largest retailers in the emirate capital of Abu Dhabi.
Spot gold hit a record high above $1,397 an ounce, then slipped back to $1,393.15. Investors often buy the metal as an inflation hedge and alternative to the dollar when the US currency weakens.
"When things are not going well in the festive seasons you can only imagine what will happen a few months from now because there is no sign that the prices will come down," said a retailer in Dubai’s old gold souk.
As cash-strapped consumers struggled to purchase gold this time of year, demand for silver coins was seen to be higher, said Pradeep Unni, senior analyst and trader at Richcomm Global Services in Dubai.
"Unlike the last year, there was an increasing demand for silver coins this year because gold is getting too expensive," said Unni.
There are no official monthly figures in the United Arab Emirates, and views gathered by Reuters are anecdotal from traders at the gold souks.
Overall, retail gold demand volume in the Middle East during the second quarter of the year was mixed, with Saudi recording a 5 percent rise on the year, while the UAE fell by 15 percent, according to a report by the World Gold Council (WGC).
Gold demand in Saudi was driven by strong domestic consumption, and UAE demand had tailed off in response to high prices during the second quarter, the WGC report added.