Despite an 8 percent rise in gold prices during the first quarter of 2022, total global demand for the precious metal increased by 34 percent year-on-year to 1,234 tons, the highest since the fourth quarter of 2018 and 19 percent above the five-year average of 1,039 tons.
The World Gold Council said that the invasion in Ukraine, coupled with rising inflation, led to higher gold prices and consumption.
Gold exchange-traded funds had their strongest quarterly inflows since the third quarter of 2020, supported by safe-haven demand. Holdings jumped by 269 tonnes, more than reversing the 174 tonnes annual net outflow in 2021.
Fallout in the GCC region?
The World Gold Council in its report said that the rise in jewelry consumption in the UAE served as the most significant contributor to the Middle East region’s overall growth in demand.
Gold jewelry consumption in the UAE reached 12.5 tons in the first quarter of 2022, up by 50 percent compared to the previous year. The GCC region’s jewelry consumption amounted to 47 tons in the first quarter, registering an 18 percent increase compared to the previous year.
The gold and jewelry industry is in high demand in the GCC region and Egypt, according to Selim Chidiac, CEO of L’azurde, the Middle East’s leading gold and jewelry designer, manufacturer, and distributor.
“Within the GCC, we are doing our best not to raise consumer prices,” he told TRENDS. “We are investing in R&D, technology, and innovation to minimize our manufacturing costs in Saudi Arabia.”
Chidiac said that inflation is an opportunity for a company to review its portfolio strategically. “Does it provide more premium or entry-level brands that are affordable?” he asked. “It should review its costs from A to Z, from employees to manufacturing, automation, investing in technology, investing in 3D printings, reviewing its business models, preserving its best talents, and making sure not to lose them during inflationary times.”
Gold retains its value
Whenever a crisis has hit, gold has proven to be a reliable ally of investors. It has been a savior for those who have incurred significant losses in other assets. And it has historically performed well during periods of rising inflation.
According to Chidiac, buying gold has always been a solid investment in value because when you buy the metal, it is not only a beautiful piece that you wear, but it also holds its value over time.
“We have seen consumers come back to us over the years to swap old jewelry,” he said, adding that during times of inflation, it’s an additional reason to acquire gold jewelry since the metal maintains its value.
Chidiac believes that with the dollar strengthening and global interest rates rising, gold prices will be under pressure.
“We invest heavily in consumer research to understand their likes and dislikes, what they want to buy on what occasion, and what price point, and how we continue to succeed in the market,” he said.