DUBAI - The Hindu festival of Diwali, an occasion for traditional gold buying, and the onset of milder weather failed to cheer traders in Dubai’s gold jewellery hub as sales remained subdued in October due to the soaring price of the yellow metal.Traders had hoped jewellery sales would pick up in the fourth quarter, ending a long spell of declining sales, as the end of hot summer season would bring more tourists and many Indian expatriates would indulge in festive buying.
"We did not see much improvement," said a manager at Popley Kewalram Jewellers in the famous Gold Souq.
Traders said October sales were little changed from the previous month, but down more than 50 percent compared with the same month last year.
“It is especially hard for diamond jewellery,” one trader said, speaking about consumers curtailing spending on high-value items in the tough economic climate.
Dubai’s retail jewellery sales have declined about 50 percent this year so far, a trend people in the business say may continue if tourists do not return to the market.
"The season has started but tourists are not buying. Let's see what happens in the last two months of the year," said a manager at Marhaba Jewellery chain.
Diwali did bring more buyers but it was “just for a day” as consumer sentiment was dampened by the record high prices of gold.
The metal rose to a record of $1,072 per ounce on Oct. 14, three days before Diwali, about 20 percent more than the prices at the beginning of 2009. It traded around $1,045 on Friday.
Climbing gold prices had similarly belied the hopes of improved sales on the occasion of Eid Al Fitr, which marked the end of the Islamic holy month of Ramadan.
Abu Dhabi, a smaller market than Dubai that does not rely so much on tourist spending as its flashy neighbour, saw an improvement of 20 percent in October sales over September but year-on-year the decline was 50 percent.
"For Diwali, we saw extra sales just for a day. It was not like before. We had 50 percent less than last October," said Ajanta Jewellers director Tushar Patni.
"High gold prices had a negative effect. The volatility is not helping the business," he said, and expects high gold prices to persist for the rest of the year.