Gold Jewelry Demand Falls Amid Rising Prices

Demand for Gold Jewelry Falls as Prices Soar

In the United Arab Emirates, a significant 18 percent decrease in demand for gold jewelry occurred in the first quarter of 2025, with consumption falling to 7.9 tons from 9.6 tons in the same period last year. The main reason for the decline was the continuously rising world market price of gold, which reached a new historical record, hitting $3,500 per ounce, while in Dubai, the price per gram was around 420 dirhams.

Price Increase: Double Impact

The skyrocketing gold price not only deterred buyers but also offered many residents an opportunity to sell previously purchased jewelry. Due to rising prices, many seized the chance to profit from their old gold items. Additionally, more people switched to cheaper gold alloys: instead of 24 and 22 carat gold, the 18 carat versions were preferred, which are much more affordable.

Last weekend in Dubai, the price of 24 carat gold was 390.5 dirhams/gram, while the 22K, 21K, and 18K variants were priced at 361.5, 346.75, and 297.0 dirhams/gram, respectively.

Impact of India's Tariff Reduction

Another factor in the decline was India's decision to reduce the gold import duty. This step particularly influenced the buying behavior of Indian tourists, who previously represented a significant portion of UAE's gold jewelry purchases. Due to the narrowing price differences, it is no longer as worthwhile to buy gold abroad, such as in Dubai, leading to a decrease in the number of Indian buyers.

Gold Bars and Coins: More Moderate Decline

Not only jewelry but also the demand for gold bars and coins moderated. The demand fell from 3.3 tons to 3.1 tons, marking a 5 percent decrease. Overall, total consumer demand in the UAE fell by 15 percent to 11.0 tons in the first three months of the year, while it was 12.9 tons a year earlier.

According to the World Gold Council, a 5 percent decline was also measured across the Middle East region, with Saudi Arabia being an exception, where buying remained vibrant during the Ramadan and Eid festivals. In the kingdom, jewelry purchases grew by 35 percent, while demand for gold bars and coins increased by 15 percent year on year.

Gold as a Safe Haven

While concerns about trade wars – especially tensions between the USA and China – initially drove up gold prices, a partial easing of the situation led to a slight pullback: the gold price dropped by nearly $260 per ounce after the peak. However, this did not deter investors, as amid political and economic instability, gold remains a stable store of value.

Experts from the World Gold Council believe that the current global investment environment is unpredictable: uncertainties surrounding US economic policy, geopolitical tensions, and recession fears are driving investors increasingly toward safe havens, many of whom still view gold as a safe asset. Therefore, demand for investment gold on a global scale reached the highest first-quarter level since 2016.

Outlook

Though consumer demand for physical gold, particularly in the jewelry market, has declined, gold remains a crucial part of the region's financial and cultural life. In the UAE and the broader Gulf region, due to economic uncertainty, investment interest is expected to remain strong, even as everyday purchases remain subdued.

(The article's source is the World Gold Council announcement.)