Dubai: Buy gold here and sell in India — more expat Indians are using this option to generate some spare cash for themselves during the summer break. At the very least, the cash thus made comes in handy to foot the sky-high airline ticket costs to India at this time of the year.
This is so because of the widening gap between what a gram of gold in Dubai and other Gulf markets sell for and what the same would fetch in India. Apart from the sales tax and customs duty that is added at the retail level on gold sold in India, any weakening of the India rupee also pushes up the cost for a buyer in India. (The rupee is going for 67.1 to the dollar.)
This month, with gold averaging Dh153.29 a gram in Dubai, it was going for Rs2,889 in India (Dh158.21, based on the current exchange rate). Within those five dirhams or so, the individual can still get a decent payback. And this works to the advantage of the individual buyer-seller in the Gulf. And these are fuelling quite intensive purchases at local jewellery outlets.
“Compared with the last two years, there is a noticeable spike in the number of Indian shoppers of gold over the last two weeks, and buying with the intent to sell them in India,” said Abdul Salam K.P., Director at Malabar Gold & Diamonds. “One can make out from the nature of the purchases — there’s a lot of gold coins being bought as are basic jewellery, which can be sold easily back in the home country.
“There is no import duty on bullion imports into the UAE and these benefits are reflected in the showroom prices. Going forward, the jewellery sector will be keenly following the VAT regime — whether it will come into effect both at the import level and on the value-added jewellery sold at the stores.”
That’s still some way down the road.
For the moment, local jewellers are making full use of Indian expats’ appetite to buy here and sell at home. Vacation-time selling now merits as much importance on their calendar as would campaigns during DSF. And retailers are coming up with highly focused campaigns, such as offering zero making charges on gold coins.
Within the retail gold price in India, apart from the 10 per cent import duty on the bullion, there is an 1 per cent excise duty imposed by the Indian government and the general sales tax by the individual states of an average 1 per cent on jewellery sales. (However, in the state of Kerala, one of the high consuming jewellery markets of India, the GST is 5 per cent.)
“Based on the above structure, the price difference between Dubai and India is as high as 10-12 per cent,” said Salam. “That’s significant.”
It has been a topsy-turvy year for UAE’s jewellery trade. For the better part of the first six months, consumer demand was weak, except during January (when the DSF campaign was on) and the week to 10 days after June 24, when the shock of Brexit sent gold prices shooting up and shoppers here wanted to get in before it got too pricey.
“Overall business is slow because of the increased price (currently at $1,330 an ounce and up from $1,250 on June 23, when the UK referendum vote took place),” said Cyriac Varghese, General Manager of Sky Jewellery. “The Brexit spike effect had in between pushed the price to $1,375, but gold is now passing through a relative soft period.
“The Bank of England rate stimulus did not take place, stocks are up and the fundamentals of the US economy look sound and suggest a strong dollar situation. But gold prices will push down from current levels only if the US Fed decides to raise its interest rate. Until then, the debate over gold’s safe haven status will go on.”
