Gold jewellers are confident of brisk sales activity in the fourth quarter as the festive season begins with Diwali this week when the price of yellow metal is hovering below $1,500 per ounce.

Leading gold retailers said the year-end festive season will set the tone for the next quarter as the consumers will buy gold jewellery amid expectation of lower prices due to the slowdown in the global economy, US-China trade war, the strong dollar, volatile oil prices and geopolitical tensions. They are confident to post 5 to 10 per cent higher sales in the October-December quarter.

Shamlal Ahamed, managing director – International Operations, Malabar Gold and Diamonds, said the festive season will surely bring the glitter back to gold trade.

“The Dhanteras, Diwali, the wedding season, Christmas etc, will provide much-needed thrust and will surely result in enhanced consumer off-take in the fourth quarter. We are quite optimistic as far as sales in the fourth quarter are concerned,” Ahamed told Khaleej Times.

Traditionally, he said there is a surge in jewellery demand during the festive and wedding seasons. “Yes. The time is right to buy gold. Gold, whatever be the market conditions, is the best investment. This is one asset which people buy when the economy was growing or in recession,” he said.

Ahamed of Malabar Gold said gold is always seen as a safe haven and the UAE is considered one of the best places in the world to buy gold because of its quality and variety of jewellery designs.

“We see an influx of tourist, especially from India and Indian sub-continental countries, for whom this region is still the best place to buy gold,” he said, adding that buying gold from the UAE makes more sense as the buyers get better design and rates for jewellery.

Demand picks up

Joy Alukkas, chairman and managing director, Joyalukkas Group, said demand for gold is definitely improving, although at a slower pace, as compared to last year.

“Demand usually picks up in the final quarter, which sees biggest festivals including Dussehra, Diwali and Dhanteras, which coincidentally is also a wedding season. The festive season is considered auspicious and buying gold is believed to bring good luck and prosperity,” Alukkas said.

Gold is considered an intrinsic part of festivals and weddings in India, Pakistan and Middle East countries and is a popular gift. It is also considered a long-term investment and customers invest in gold with each dip in prices, as this will help in averaging out prices.

“Consumer sentiment towards gold has been wary over the last few months owing to rising prices. The consolidation and the reducing prices are a perfect timing with the festive season around and consumers will naturally tend to take advantage of this,” he said.

“We are optimistic that consumer sentiments remain the same. Gold prices are also coming down gradually and with the festive season around the corner, I think we are going to see decent sales in this last quarter,” he added.

Future trend

Spot gold prices, which rose 16 per cent so far this year, traded at $1,490.70 per ounce in London on Friday but waiting for the clues to set the future direction. It moved in a $1,476.65-$1,497.74 an ounce range last week.

Analysts and market insiders said gold future trend depends on Brexit deal, Fed rate cut decision and US-China trade deal.

“The $1,380-$1,400 range ought to be a solid bottom for gold and $1,480-$1,520 seems really to be the equilibrium,” Tai Wong, head of the base and precious metals derivatives trading at BMO, told Reuters.

Karim Merchant, the CEO and managing director, Pure Gold Jewellers, said the price of gold has more or less stabilised as there is optimism over US-China trade war coming to a conclusion.

“Even though, prices are lower than 2 months ago, price volatile remains. Overall lower gold price prior to the upcoming festivities of Diwali is a good sign for jewellery retailers,” Merchant told Khaleej Times.

Elaborating key factors that will drive gold prices, he said the US-China trade war, changes in interest rate, terms of Brexit, geopolitical tensions and oil price may affect the price of gold.

“It is hard to predict the future trend of gold movement. It seems volatility is the new norm in gold trade,” he said.

It’s time to buy

T. S. Kalyanaraman, chairman and managing director, Kalyan Jewellers, also said it is hard to predict gold prices because the major factors that influence the yellow metal are multi-fold.

“Currently the market seems to have steadied itself and the prices have reached a plateau, making it a good time to buy gold. In times of crisis like financial or political uncertainty, while the value of the paper currency may erode, gold successfully preserves wealth. So it is always a good time to invest in it,” he said.

To a question, he said there are multiple national and international factors that have a direct influence on driving the demand for gold. The rise in gold prices have further strengthened the conviction of consumers, and most now see it as a safe investment haven.

“It is common for gold demand to strengthen during the fourth quarter propelled by the wedding season as well as festivals such as Diwali, Dhanteras and Bhai Dooj, etc when buying gold is considered auspicious,” he said.

Kalyanaraman further said big-ticket wedding purchases have continued through the last couple of months. “Presently, with gold prices inching down, we are positive that the market response for Diwali, propelled by token and gifting purchases, will also be positive.”

In the international market, gold prices rose over $250 per ounce during the last one year to hover around $1,500 per ounce this month as compared to the same period last year. It was trading at $1,242.20 per ounce on October 5, 2018.

“Post-Diwali, once the marriage season kicks in, Dubai’s transition into a wedding destination will also have a positive impact on the jewellery business. VAT refund for tourists make Dubai a great destination for Indian travellers shopping for gold”