The yellow metal, which surged more than 600 per cent to $1,923 between 2001 and 2011, will slip below the psychological barrier of $1,000 per ounce and may hit as low as $800 before recovering by year-end. It fell around nine per cent this year so far and last traded at $1,070.81 on Monday.
Firoz Merchant, founder and chairman of Pure Gold Group, forecasts that the price of gold will go down below $1,000 and is expected to settle between $800 and $1,000 an ounce as the Fed has finally returned to a higher interest rate policy.
"The quarter-per cent Fed rate increase will contribute to further reduction in gold prices, which will entice more customers to purchase gold as it is an integral part of weddings, gifting and festive occasions in many cultures," he said.
He said the Fed's hike indicates that interest rates will gradually move up, contributing to a further impact on gold prices.
"Customers, who consider gold to be a safe haven against inflation and uncertain global monetary policy, will use this opportunity to increase their gold assets. The company's 22-carat gold jewellery sales have increased by 40 per cent in the past one month when gold prices dropped below $1,100," he said.
Karim Merchant, group chief executive and managing director at Pure Gold Jewellers, said the yellow metal extended its bearish trend this year due to global economic developments and speculations on the Fed raising its interest rate level. He said the precious metal has mostly stayed in the range of $1,300 to $1,100, which has brought in stability and further confidence for buyers in the metal's intrinsic value.
"In 2016, we strongly believe that every dip in gold prices is an opportunity for consumers with a long-term view to invest into this historical-proven safe-haven metal. We had seen many fluctuations in gold prices this year, but the yellow metal forecast for 2016 and onward looks very optimistic. The decline in gold price usually drives retail jewellery demand and it has been the trend over the years," Merchant told Khaleej Times.
To a question, he said the company's gold sales - excluding Diwali buying - have registered strong single-digit growth this year so far.
'Genuine pricing'
"We see massive demand figures from the consumer side as well. Sales for diamond jewellery have remained flat due to changes in consumer pattern this year; however, we remain very confident with our new pricing programme of offering customers fixed, transparent genuine pricing on our diamond jewellery which will push us towards sales growth in 2016," he added.
About the expansion plan, he said Pure Gold Jewellers has opened multiple gold stores location across the GCC, which is in line with the group's 2018 vision.
"Recently we opened three new retail outlets in the UAE and two stores in Oman. Our expansion plans will continue in the following year as well. By 2020, we expect to increase our presence to 250 stores," he said.
T.S. Kalyanaraman, chairman and managing director of Kalyan Jewellers, said gold prices reached historic lows for the last six years in 2015.
"Initially, the lower prices did result in higher uptake of gold. We have seen that customers are playing a wait and watch game. However, buying interest has kicked in and we believe it should pick up in the months to come," Kalyanaraman told Khaleej Times.
"We are seeing good buying interest for diamonds and studded stones and we think this will complement higher gold sales."
Sharing his expansion plan in the region, he said his brand forayed into the UAE market in 2013 and steadily
expanded its operations in the country.
"Kalyan Jewellers has a network of 10 showrooms in the UAE, including the new one in Sharjah. We have developed a customer base of over 250,000," he said.
Referring to tremendous response to the brand's products, he said his company set up a manufacturing facility that processes over 150kg of gold every month. This will ensure that customers in the region will get the latest and trendy merchandise. "We are bullish about our growth prospects and have registered higher than industry growth. Going forward we will aggressively engage with customers," he said.
Joy Alukkas, chairman and managing director of Joyalukkas Group, said economic and supply/demand factors suggest a bullish forecast for gold in 2016. "Gold prices are expected to stage a turnaround in the second half of this year and enters into 2016."
"We witnessed an overall increase by 15 per cent this year and are targeting an increase of 20 per cent in 2016. We have plans to expand all our business operations rapidly in the next couple of years. The expansion will see the group presence extend to 16 countries around the world," Alukkas told Khaleej Times.
About the latest jewellery trend, he said consumers in the UAE tend to buy more of ethno-contemporary, trendy and chic designs.
"Buyers also occasionally opt for very ethnic jewellery, if they purchase it for a special occasion back home. When it comes to purchase of jewellery in the UAE, it's mostly a planned buy and seldom an impulse purchase," Alukkas said. "Consumers in the UAE tend to buy heavyweight jewellery compared to lightweight as the gold price is at an affordable level."
Q4 pickup
Pranit Naheta, owner of Gehna Jewellery Boutique, said it is an ideal time for bullion investors to buy the precious metal due to prevailing lower rates.
"Gold being at its lowest rate now since it peaked in 2011, this makes it an ideal time to buy for bullion investors. On the other hand, prospects look brighter for 2016 and we foresee the price for gold to gather pace in the fourth quarter of 2016 as part of an accelerated economic global growth in India, US and
Europe, thus stimulating trade in the UAE."
"We have been witnessing a decrease in the demand for gold due to a fall in consumption across two of the largest markets for gold, China and India in the second quarter of 2015. This has had its effect globally making key-investors lose their appetite for the precious metal momentarily," Naheta told Khaleej Times.
Shamlal Ahmed, managing director for international operations at Malabar Gold and Diamonds, said 2016 is expected to be a stable year for the precious metal and prices are expected to reach $1,300 by mid-year and stabilise there.
"The US Fed rate's impact on gold is been expected for a while now. Even though the current price is factoring in the impact of the fed rate decision, we will see some price variations in the short term."
He said yellow metal prices fluctuated this year and the customers took advantage by purchasing more jewellery at low rates. "2015 saw various ups and downs. Overall, there was price advantage which customers utilised to the fullest. We have recorded 15 per cent growth in 2015 and expect 15-20 per cent growth in 2016 as well."
About the latest jewellery trends, he said more customers are preferring to buy diamond jewellery for gifting and own use.
"The demand for modern gold jewellery is growing and gaining more pace with the price of gold being in an affordable level. Artificial jewellery is not a substitute for the real jewellery lovers and therefore the primary preference is still for real gold and diamond jewellery," Ahmed said.
By: Muzaffar Rizvi.
Review: Emerging Market Formulations & Research Unit, Flagship Records.
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