Purchases are plummeting at the Gold Souk, according to salespeople at numerous shops, as bullion goes on a record run that’s now approaching $2,200 an ounce. Most locals are just browsing, leaving the majority of buying to tourists who are willing to pay more while they’re on vacation.
“They ask why it’s so high so they are buying less,” said Yemeni shopkeeper Abdelnaser Alyafie, who’s worked in the market for six years. “The price is very high so people think the small things are okay but if they want to buy the big stuff, more grams, they will think, let the price go down. Then they’re going to buy.”
The most affected were the gold brick shops, with workers at three locations saying sales are down by half. One seller who traded in bricks and jewelry said the latter was performing better as the crimp on demand was more notable for heavier items.
Mohammad Tariq manages one of about a dozen Kanz Jewels stores in the massive, open-air market. Business is down about 40% this week, with the makeup of the customers being noticeably different, he said.
“Tourists won’t think about the price, they come to Dubai and buy,” said Tariq, who’s been a gold salesman for 12 years. “They only have one chance to purchase the goods.”
Everyone else is holding back, he said. At some stores, people are selling back some pieces to cash in.
Gold has risen for eight straight trading sessions, and the speed of bullion’s ascent has taken many investors by surprise, with no clear catalyst for the rally beyond long-standing pillars of support. Speculation over the Federal Reserve’s pivot to looser monetary policy, geopolitical risks and buying by central banks, led by China, have helped spur momentum.
The traders working thousands of miles away at one of the oldest gold markets in the United Arab Emirates told a Bloomberg News reporter that they’re just as shocked.
“It’s unbelievable,” said a salesman who’s been working at the Souk for 22 years and asked not to be identified as he’s not authorized to speak for his employer. “Once they see the gold and they see the price, they run.”
Residents and locals, in particular, are showing less of an appetite because of the price surge, though tourist season has helped ease the drop. Visitors, many from the UK or US, said they knew this was their last chance to buy mementos that they wouldn’t be able to find back home.
Alyafie said much of the foot traffic is now window shoppers or people trying on jewelry and putting it back, and sales at his shops have fallen by about a third. Still he’s confident that customers will buy again.
If you have an upcoming wedding or you’re afraid of missing out on a piece or it’s your last day in Dubai, you’ll pay the price no matter how high, Alyafie said.
“Yellow metal is the only commodity people would fight over,” he said.