UAE shoppers now get diamond price protection as gold keeps hitting new peaks
Gold price too high? Opt for diamond investments then - and with guaranteed buybacks
Dubai: As gold prices inch closer to a never-seen-before $2,600 an ounce, jewellery shoppers in the UAE are taking an ever closer look at diamond studded pieces as an investment option.
Leading jewelers are prompting shoppers with the promise of full/near full resale value on diamond jewellery, a trend that is gradually encouraging buyers to think beyond gold. Shoppers certainly need to as gold has been setting new record highs nearly every month this year. Today, it has reached $2,586 an ounce, going past the record it set on Friday last (September 13).
“In the past, the lower resale value of diamond jewellery was seen as the biggest drawback in the gold vs. diamond debate among shoppers,” said Joy Alukkas, Chairman and Managing Director of the jewellery store network that carries his name. “Now that retailers are offering price protection schemes on diamond trade-ins, it’s changed the entire situation in reassuring shoppers.”
Or, more likely, changing their perception.
Now that retailers are offering price protection schemes on diamond trade-ins, it’s changed the entire situation in reassuring shoppers.
The price protection scheme is still limited to a few jewellery retailers, but should soon become widespread as more customers insist upon such guarantees for diamond purchases. Currently, gold is still the overwhelming favourite when it comes to jewellery purchases in the UAE, making up around 70-80 per cent of the volumes. But the 15-20 per cent that diamond jewellery current enjoys is still an improvement from the 5-10 per cent in the early 2000s.
Ever higher gold prices
Change had to come in given the way gold prices are soaring and drastically limiting the number of grams that shoppers could buy in any one purchase. In this scenario, offering price protection guarantees on diamond purchases was an absolute must.
The best part is that diamond prices are appreciating, and for shoppers, that’s the upside.
“First, the majority of buyers of gold are doing so for investment purposes – we had to convince them that buying diamond was an equally safe investment,” said Abdul Salam K. P., Vice-Chairman of Malabar Gold & Diamonds. “There was a lack of confidence whether diamond prices will hold up. Our price protection offer is trying to convince shoppers that they have it.
“In the past, not all retailers were following the same standards when it came to diamond buybacks. That explains why shoppers felt they were not getting the value at which they bought.
“If the bought diamond is certified, owners will more or less get the same price if they trade in. There will be some handling charges, but they will get the prevailing prices for the diamond based on caratage, etc.
“The best part is that diamond prices are appreciating, and for shoppers, that’s the upside.”
Salam adds that Malabar was the first jeweler to offer diamond price protection in the UAE, and that sales have increased as a direct result. “We are providing 100 per cent value back on the prevailing rate for diamonds or gold bought from us,” said Salam. “For trade in exchange for cash, we are buying back at 90 per cent of prevailing price for diamonds.”
Changing buyer preferences
It will help that consumer tastes too are changing. A younger buyer profile is getting active in jewellery purchases. But even they require assurance that what they are picking up will stand up on value.
Also, more visitors are coming to the UAE to purchase jewellery for upcoming wedding requirements. And it’s not just gold jewellery collections that these shoppers are interested in. (Plus, with the UAE upscaling its profile as a wedding destination, jewellery sales have received a boost on that count too.)
For our diamond collection, we offer 80 per cent of the total invoice value (not just the diamond value) on exchanges.
Clearly, it had reached a point where the UAE jewellery trade could no longer get by on gold sales alone. The World Gold Council data points to lower gold jewellery sales in recent quarters. And even with making charges getting cut, gold was getting to be too precious when it shot past $2,400 and $2,500 and now a short few steps away from $2,600.
“The diamond price protection represents a significant shift in the UAE market,” said Arjun Dhanak, Director at Kanz Jewels. “Traditionally, diamonds haven't matched gold's liquidity and resale value. “The introduction of buyback guarantees suggests a move towards enhancing their status and providing more value and security to customers.
“For our diamond collection, we offer 80 per cent of the total invoice value (not just the diamond value) on exchanges.”
Sustain the price message
Even with all the new guarantees, it will take a sustained effort for the typical gold shopper to switch over to a diamond encased jewellery. The whole buyback process needs to be transparent in much the same way that exchanging gold is.
With increasing interest in diamonds throughout the Middle East, our policy ensures we deliver lasting value with every purchase.
This is why shoppers must take extra care to retain their invoices and diamond certifications over the years if they eventually plan to exchange it for something new.
Exchange for cash
Kalyan Jewellers offers 100 per cent value on exchange of diamond jewellery purchased from them - and if the return is made for cash, it’s a 90 per cent buy-back rate. “With increasing interest in diamonds throughout the Middle East, our policy ensures we deliver lasting value with every purchase,” said Ramesh Kalyanaraman, Executive Director at the retailer.
That’s a decisive point – that not just jewellery exchange programmes are on offer, even cash too is returned on a buyback.