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UAE jewellery buyers told: Don’t put all money in gold

Jewellery prices in UAE hit highest level in a week, but analysts warn buyers against betting on precious metal

12:12 May 7, 2018

Dubai:  UAE consumers have been warned not to put most of their savings into gold jewellery, even as prices are forecast to hit a whopping $1,800 an ounce and some big-time investors are already pouring billions of money into the precious metal.

The price of 24K stood at Dh159.50 per gram on Monday, down nearly Dh3 per gram from early April, but up from about seven days earlier. At the same time, spot gold hit $1,318.85, the highest price reached since late April.

Gold's recent rally has been due to a weak US dollar.

Big-time gold investor

While prices seem to fluctuate every week, some investors are expecting gold to hit $1,800 an ounce from just a little over $1,300 an ounce.

One of these investors is Egyptian business tycoon Naguib Sawiris, who has reportedly put 50 per cent of his money into gold. The billionaire said he believes gold prices will rise further while stock markets will crash,  so he has invested half of his $5.7 billion net worth in the precious metal.

“In the end you have China and they will not stop consuming. And people also tend to go to gold during crises and we are full of crises right now,” Sawiris told Bloomberg Television.

Caution

Vijay Valecha, chief market analyst at Century Financial cautioned both jewellery buyers and investors against following Sawiris’ advice.

He said that while it is possible for gold to hit $1,800 an ounce in 2021, it is not wise for anyone to put most of their savings into it.

“Gold and other precious metals like palladium and silver are certainly looking to have bottomed out. They appear to be bullish over the long term and the glory days of $1,800 an ounce on gold could be seen by 2021,” Valecha told Gulf News.

”However, it is never wise to invest 50 per cent of one's portfolio in a single commodity. Diversification is a much needed tool for investors of all sizes.”

He said it would be more financially beneficial for jewellery buyers to just set aside about 6 per cent to 8 per cent of their savings for gold purchases and put the rest of their money in other types of investment.

“Most jewellers usually hedge their gold inventories to reduce risk of losing margins on business. As for jewellery buyers, it would be a good idea to invest 6 per cent to 8 per cent of their portfolio on a basket of precious metals, and would be advised to do it online and reduce the cost on the investment."

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