As gold prices drop, UAE shoppers turn 'investors' with monthly payments, trading platforms

Dubai: Shoppers in the UAE are rushing back to jewellery stores as gold prices come under pressure for the first time in the last two years.

They are not alone.

Investors too are focusing on gold as an option at a time when the price has dropped by more than $200 in a matter of days. (This morning, gold remains under some stress at $2,568 an ounce, lower by $12.88. The UAE gold rate for a gram of 22K is Dh286.75.)

There were many investors waiting for gold prices to drop before committing to buy. But with gold hitting successive peaks – reaching $2,200 for first time and then accelerating to a near $2,800 between March and October this year – getting in was difficult. (For regular updates on gold and currency exchange rates, click here.)

Now, with prices taking a dive since November 5's US elections, there’s a chance to get into gold on more favourable terms.

This is where shoppers are turning ‘investors’. In the last two weeks, more UAE residents have signed up for the monthly payment schemes that major jewellery retailers have. At the end of 12 months, they can pick up the gold, whether that’s jewellery, coins or bars.

“In our case, the minimum investment is Dh250, but the majority of those in these schemes are at Dh1,000-Dh2,000 a month,” said Abdul Salam K.P., Vice-Chairman of Malabar Gold & Diamonds. “It’s mostly women who sign up for this, and they usually time the 12 month payments to close before their summer holiday buying or during Diwali.

At current gold prices, there is more buying being done with an investment mindset rather than just for jewellery.

- Abdul Salam K.P. of Malabar Gold & Diamonds

It shows mindsets are changing among traditional gold buyers, who would earlier only have bought jewellery upfront when they deemed the price to be right. Now, they are learning to be patient, become disciplined about their investments, and then in 12 months, decide whether to pick up a jewellery set or as gold coins/bars. 

Gold certificates and fractional buying

Gold investment options are multiplying, and banks and top-tier trading platforms see an opportunity that cannot be missed. Dubai’s Emirates NBD backed gold certificates scheme is gaining a lot of investor traction these days, according to banking sources, and where the minimum investment needs to be for 100 grams. (At current rates, that means a minimum funding of Dh30,000 plus. Investors can redeem in cash or physical gold bars on any day before maturity, says the Emirates NBD website.)

Or they can go for ‘fractional’ or piecemeal ownership of gold, where they don’t actually take possession of what they are buying. It’s purely done as a traded investment, and this is where trading platforms come in. Many investors are waiting to see if gold price turns even more favourable.

“I wish I had invested in gold before as the price shot up due to the geopolitical situation,” said John Diomidius, who is based in Dubai, and who uses the Equiti platform to handle his trading. “I feel I've missed the boat - but there's a good chance it's going to be my next investment.

“The price increases when there is geopolitical instability and there's been plenty of that recently. Hopefully for this, all calms down soon, but while things are the way they are, Gold is a great investment.”

Some have already gotten into gold – and some are liking the look of silver too. In the last 12 months, silver, which is trading at $30.51 an ounce, has gained 28.3%.

“With the leverage on gold being high, it is easy to be emotionally involved when you see digits on the screen go up in ‘red’ or ‘green’,” said Jake Townsend, who is UK-based but works remotely for a Dubai company.

“When you take a step back, look at the overall market and pair gold alongside silver, you can get a better understanding of the flows. For a good investment, one needs to be patient and look at the USD flow and silver side by side to determine whether to buy or sell the metal.”