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Dubai’s jewellers see better value in 18K push

Looks to hit sweet spot with European buyer

  • A tourist tries on 18k gold necklaces at jewelry store in the Gold Souk DubaiImage Credit: Zarina Fernandes/ Gulf News
  • Gold ornaments on display at a store in Dubai's Gold Souk. Image Credit: Zarina Fernandes/Gulf News
Gulf News

Dubai: Seeking to put the sparkle back into the gold trade after a less than stellar showing in the second half of 2012, Dubai’s jewellers are set to put their marketing muscle behind 18-carat jewellery for the first time. They believe such a move would help considerably improve offtake of jewellery among Western and Chinese shoppers, particularly tourists during the peak holiday season and during DSF.

It also signals a not so subtle shift on the part of Dubai’s jewellery trade which has until now focussed exclusively on 22-carat jewellery and demand from Indian and Pakistani residents and those on visit.

“18K is the most popular caratage in jewellery internationally, especially in Europe; hence it will be appealing to tourists from there,” said Abdul Salam KP, group executive director at Malabar Gold and Diamonds. “It obviously has the advantage of a lower price compared to 22K and offers more design variety as it is acceptable internationally and easier to make in complicated designs.”

On pricing, there is a fairly significant gap between the carats. Yesterday, a gram of 22K was going for Dh180.94 ($49.26) in Dubai, while its 18K counterpart had a less sheen in value terms at Dh147.99 ($40.29) a gram. Moreover, the making charges on 18K are said to be considerably lower.

Apart from the Western tourist, jewellery chains are keeping an equally keen look out for Chinese shoppers. They were quite conspicuous jewellery buyers during DSF 2011, but less so last year. Retailers are hoping for a marked improvement in the upcoming one and expect the 18K push will win them over.

“The Chinese tourist prefer 18K gold jewellery as well as 24K gold bars,” said John Paul Joy Alukkas, executive director, Joyalukkas Group. “The preference for the former is because they can use it more as a day to day rather than special occasion jewellery. The gold bars are with an investment perspective.”

Dubai’s gold trade definitely needs a volume boost and if 18K can provide that, retailers will not mind much. Demand had taken a dent last year after the steady upturn in gold prices through 2011 stalled and went through a bit of volatility.

But a key factor for the subdued demand had to do with events in India, where customs authorities dusted off a long dormant 1967 gold import duty and started applying it vigorously since the second quarter of 2012. This effectively meant that the price differential buying gold jewellery in Dubai as opposed to doing the same in India came down significantly. It also meant that any Indian expat here taking gold back to India would be hit with steep duties. As a case in point, a woman passenger wearing a gold chain weighing 40-gram would have to shell out Rs4,100 as duty on arrival at an Indian airport.

“Implementation of the recent revision in customs duty for gold and the related hassles for passengers has affected the mindset of NRI passengers in a big way,” said Sunny Chittilappilly, chairman of Dubai Gold and Jewellery Group. “As a result gold buying in the Gulf reduced to an extent and demand for 22K Indian jewellery was affected during the high purchase season close to summer.”

Several depositions, both individual and at the industry level, have been made to the Indian authorities for a repeal or a relook at the 1967 provisions. Dubai’s jewellers believe something will come out of the collective action.

In the meantime, they hope the 18K push and DSF 2013 — in which 15 kilos of gold can be won - will cut them some slack.