The iconic Gold Souk in Dubai, often referred to as the “City of Gold,” has long been a hub for 22-karat gold jewelry, a traditional choice for weddings, religious celebrations, and family investments. However, soaring gold prices, now surpassing $3,400 per ounce, are prompting a shift in consumer preferences toward lighter gold jewelry and diamonds, particularly lab-grown diamonds.
While gold has become an increasingly popular investment asset, fueled by factors such as U.S. tariffs, the surge in bullion prices is having a mixed impact on jewelry demand. According to Andrew Naylor, head of Middle East and Public Policy at the World Gold Council (WGC), there are two distinct trends at play in markets like Dubai: heightened interest in gold as a safe-haven investment, alongside a noticeable slowdown in gold jewelry sales due to the elevated prices.
Retailers at the Gold Souk are witnessing these changes firsthand. Fahad Khan, a sales representative at Damas Jewellery, noted that the high prices have led to a decline in potential customers, while some shoppers, like 52-year-old Lalita Dave, are turning to diamonds as a more affordable alternative. “It’s a little bit tough to afford gold, so I think it’s better to go with diamonds,” Dave shared while browsing the souk.
Historically, Dubai has attracted gold buyers, particularly from Iran and India, drawn to its reputation for 22-karat gold jewelry, prized for both ornamental and investment purposes. However, the past year has seen a 27% increase in gold prices, contributing to a 13% drop in gold jewelry demand within the UAE. This decline outpaced a global dip of 11%, according to WGC data.
Looking ahead, the WGC’s gold demand trends report predicts that jewelry demand could continue to face pressure in 2025 if gold prices remain high or volatile. Price fluctuations, rather than consistent high prices, are increasingly influencing consumer behavior, particularly in India, where shifts in purchasing habits often impact Gulf markets like the UAE.
Goldman Sachs has also adjusted its gold price forecast, predicting that by the end of 2025, gold could reach $3,700 per ounce, with potential peaks of up to $4,500. “Higher gold prices are likely to dampen demand for jewelry, in a classic example of how the best cure for high prices is high prices,” said Russ Mould, investment director at AJ Bell.
One clear indicator of changing trends is the growing popularity of lab-grown diamonds. According to data from the Gem and Jewellery Export Promotion Council, India’s exports of lab-grown diamonds to the UAE surged by nearly 57% in 2024, reaching $171 million. Meanwhile, traditional diamond exports from India to the UAE rose by 3.7% in the same period.
The UAE remains a key player in the global diamond market, ranking third in diamond imports in 2023. Although the UAE accounted for just 1.5% of the global diamond jewelry market by revenue in 2023, it is poised for substantial growth, with projections estimating a 5.9% annual increase, potentially reaching nearly $2 billion by 2030.
Trade tensions, particularly with the U.S., have also impacted the jewelry market. Some Indian diamond exporters are exploring alternative markets and production hubs, including shifting operations to the UAE. Shamlal Ahamed, managing director of international operations at Malabar Gold & Diamonds, emphasized that while the rise of lab-grown diamonds is partly driven by design preferences, he remains optimistic about the continued demand for gold jewelry, despite current price concerns.
“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,” Ahamed concluded.
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