DUBAI: In the bustling Gold Souk in Dubai, dubbed the ‘City of Gold’, 22-karat gold jewellery is a traditional favourite for weddings, religious celebrations, and as a family investment.
Yet with bullion prices hitting record highs above $3,400 an ounce, there are signs of change, as buyers look to diamonds and lighter gold jewellery, instead.
While U.S. tariffs and other factors have added fire to already hot demand for gold as an investment, the impact is different for gold jewellery, according to Andrew Naylor, head of Middle East and Public Policy at the World Gold Council (WGC).
“In markets like Dubai, this creates a two-fold effect: on one hand, you see stronger interest in gold as a safe-haven asset, on the other, high prices dampen jewellery demand.”
At Dubai’s Gold Souk, retailers told Reuters they are seeing this trend, as current prices prompt shoppers to look for alternatives.
“There are no potential customers nowadays because of the gold prices,” said Fahad Khan, a sales representative at retailer Damas Jewellery.
“It’s a little bit tough to afford gold, so I think it’s better to go with diamonds,” said Lalita Dave, 52, as she browsed around the Gold Souk.
Lab-grown diamonds
Dubai has been a magnet for gold buyers for at least 80 years, starting with Iranian and Indian traders, both cultures sharing a tradition of 22-karat jewellery for adornment and investment.
Yet as gold prices rose 27% last year, demand for gold jewellery in the UAE fell by around 13%, outpacing an 11% drop globally, according to the WGC.
Jewellery demand could face further pressure across key regions in 2025 if gold prices remain elevated or volatile, the WGC said in its gold demand trends report published in February.
Price swings, more than price levels, are increasingly shaping consumer behaviour, particularly in India, it noted.
Shifts in Indian purchasing patterns often ripple through Gulf markets such as the UAE, where buyers are a key driver of sales.
Goldman Sachs recently raised its end-2025 gold forecast to $3,700 per ounce and said prices could climb as high as $4,500.
“Higher gold prices are likely to dampen demand for jewellery, in a classic example of how the best cure for high prices is high prices,” said Russ Mould, investment director at AJ Bell.
One sign of economising has been the rise of lab-grown diamonds.
India exported $171 million worth of lab-grown diamonds to the UAE in 2024, up almost 57% from $109 million two years earlier, data from the Gem and Jewellery Export Promotion Council showed.
India’s exports of cut and polished diamonds to the UAE in the April–November 2024 were up 3.7%.
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UAE ranked third in global diamond imports in 2023, trade data shows, its primary trade partners including India, South Africa, and Belgium.
While the UAE accounted for just 1.5% of the global diamond jewellery market by revenue in 2023, it is projected to grow by 5.9% annually to reach nearly $2 billion by 2030, according to Grand View Research.
That outpaces the global growth forecast of 4.5% and makes the UAE the fastest growing market in the Middle East and Africa.
Trade tensions
One impact from recent trade tensions with the U.S. has been accelerated talk about finding alternative markets and production hubs, two executives at major Indian diamond exporters told Reuters.
If tensions persist, potentially spanning years, one of the sources speaking to Reuters on condition of anonymity said his company’s contingency plans included shifting some Indian production overseas, including to the UAE.
Shamlal Ahamed, managing director of international operations at retailer Malabar Gold & Diamonds, told Reuters the rise in lab-grown diamond jewellery sales in the UAE appeared to be driven more by design preferences than pricing and he remained bullish on gold jewellery demand.
“While price-conscious buyers may wait for a dip, our experience shows that such declines are often short-lived, with buyers quickly adapting to new price levels.”
