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Gold regains lustre with retailers

Targeted promotions create surge of transactions as metal returns to upward trend

Image Credit: Zarina Fernandes/Gulf News
Tourists at a jewellery store in Dubai’s Gold Souq. Some buyers were largely absent last year after gold prices went through aperiod of volatility, but the market is picking up.
Gulf News

Dubai: The shine is back for Dubai’s gold and jewellery trade with the DSF 2013 promotions finally coaxing shoppers to return after many stayed away for the better part of last year. More importantly, retailers are seeing a sharp rise in the number of transactions averaging Dh2,000 to Dh3,000, a price category traditionally the bedrock for the trade here.

These were the buyers who were largely absent last year after gold prices went through a period of volatility, while many of the Indian expat shoppers here were also put off by India’s strict enforcement on the quantity of gold a visitor can bring. During the fourth quarter of 2012, these factors saw a sharp erosion in the low-value purchases of Dh1,500 to Dh3,000.

But DSF 2013 has turned things around for the Dubai’s gold sector. “Based on an analysis we conducted half way during DSF, participating outlets witnessed a 52 per cent growth in sales volume compared with the same period last year and the figure is steadily growing,” said Sunny Chittilappilly, chairman of Dubai Gold and Jewellery Group. “A few retail chains claim even better growth than this.”

Having hourly SMS promotions for the first time — 13 during a day where gold coins are offered — helped pull in the volumes and shoppers looking for a low-value purchase. In a marketing tie-in that fitted in well with the spirit of the times, the coins were marked with Dubai’s bid for Expo 2020.

The SMS draws each day convinced a wider net of shoppers to commit to purchase. A Dh1,500 jewellery purchase entitled them as did buying a Dh800 gold coin — weighing four grams and in 22K — with the Expo 2020 theme.

The Expo 2020 linkage serves another purpose. “We realised there is no better time than DSF to launch these special edition coins when the world comes to Dubai,” said Chittilappilly. “Tourists have an opportunity to take home the ‘2020 World Expo – Candidate City Dubai’ coin as one of the souvenirs.”

Sales have now crossed 5,000 coins in the 20 plus days that the promotion has been on.

There are other favourable factors at work. Since December gold is back to tracking an upward path. “Prices have seen mild fluctuations in the recent past, however the trend is upwards,” said Shamlal Ahmad, managing director — international operations, Malabar Gold and Diamonds. “We feel in 2013 gold will be between $1,850-$2,000 an ounce.”

Then there was helping hand delivered by events in India. The government last week hiked import duty on gold from 4 per cent to 6 per cent. In one stroke, this has managed to widen the gap for the Indian expat between purchasing jewellery here and doing so in India.

For instance, Dh1,373 (Rs20,000 at yesterday’s rate) would get a shopper 7.1 gram of gold in Dubai as against 6.6 gram in India. As any shopper will tell you, each gram does count.

“Customers are buying more gold from here to take advantage of the 6 per cent duty plus 1 per cent local tax (in India),” said Ahmad. “A difference of 7 per cent makes a positive difference.”

These developments, taken together and on their own, have pushed gold and jewellery sales in January to new highs. “We have seen a surge in sales during this DSF compared to the last two DSF periods,” said John Paul Joy Alukkas, executive director, Joyalukkas Group. “We have seen Indian and other Asian tourists and we are also getting a great response from UAE residents.”

For retailers, the next question would be whether the January upturn can be sustained over the first quarter and beyond.