Drop in UAE gold prices and Diwali led to the best gold sales weekend in 2022

Dubai: Online is finally making its presence felt in the UAE’s gold and jewellery market, with the recent ‘Dhanteras’ and Diwali buying seeing more than 40 per cent of shoppers make a booking and doing the down payment this way. At some niche jewellery outlets, the online-led bookings even hit the 50 per cent mark, as buyers realised this is the best way to guarantee price lock-ins.

“More than any other retail category, UAE’s gold market is ideal for omni-channel – book online when prices drop, even do the selection and then do the buying within a 30-day period,” said a retailer.

“All this happened over last Friday and then the weekend, when prices first dropped to a year’s low of Dh184.75 a gram for 22K and then rose to Dh188.75.”

So, anyone who booked when the UAE gold rate was at Dh184.75 was cushioned against the further increase. “Based on our numbers, 30-40 per cent who bought at our stores Saturday had done advance lock-ins,” said Abdul Salam K.P., Vice-Chairman of Malabar Gold & Diamonds. “It wasn’t just the Indian shopper who came in to do their Dhanteras/Diwali shopping – just about anyone who wanted to make use of the price drop and promotions bought in the UAE during these three days.”

Some of the demand extended into Monday – which was when Diwali was celebrated – as well. The Friday-to-Monday stretch marked the best phase so far this year for UAE’s gold and jewellery trade.

“My estimate on this month’s sale is 250 kg a day of 22K and another 200 kg in other gold categories,” said Salam. “This works to 14 tons total in retail sales this month compared to 10-11 tons in other months.”

Today (October 26), gold is trading at $1,654 an ounce in international metals market, against $1,648 yesterday. Priced had slipped to around $1,625 late last week, which translated into Dh184.75 for the UAE gold rate ahead of the crucial peak buying for Dhanteras.

“Without the UAE gold rate being at its lowest this year, Dhanteras sales might not have happened to this level,” said a retailer. “It would have at best shown some improvement from the last two years – because prices today are Dh10-Dh20 a gram lower than in 2021 and 2020.

“But when prices dropped to the year’s low of Dh184.75, it opened the gates and the rush was on.”

On Saturday, that rush started around 2pm, which was when the Dhanteras buying phase kicked in. The shopper numbers kept growing through the evening, and even those shoppers who had not booked at Dh184.75 were comfortable buying at Dh188.75.

On October 19, the Indian rupee fell below 83 to the dollar for the first time and - even with ongoing efforts by India’s central bank to reclaim some value – is at a soft 82.50/82.70 levels. For Indian expats in the UAE, the rupee and gold drop that happened simultaneously was a double-barrelled opportunity.

“Typically, when rupee drops like the way it did, Indian expats’ first inclination would be to remit,” said an analyst. “What may have happened this time is that many expats believe there is still more for the rupee to drop. And instead of remitting, they bought gold on the dip – this means they also benefit from the 10-15 per cent price difference if they sell the gold in India.

“And they benefit from the INR value decline too.”

This Diwali, gold shoppers were more taken up with what they see as straight discounts. It meant what jewellery retailers offered on making charges was more important than any other consideration, especially with tourists and those resident shoppers on a budget.

“At no other time has making charges on a per gram basis been of this significance to the shopper,” said Tushar Patni of Ajanta Jewellers in Abu Dhabi. “We ran two simultaneous promotions related to making charges, and found sizeable take up rates on Dhanteras. If retailers were able to show immediate savings, shoppers were willing to buy.”

It may be that shoppers were too used to seeing gold in the $1,700 plus range for most of these near three years that they were not willing to let go of last week’s price drop. The Dh184.75 a gram marked a key point in their need to spend on their next gold purchase.

And it just so happened that this coincided with Dhanteras and Diwali…