Exchange or cash out? Gold consumers in the UAE could get a lot out of their existing holdings. If they had bought in 2015, they could make a clean Dh40-Dh45 a gram now. File picture of activity at a Kanz Jewels outlet in Gold Souq. Image Credit: Gulf News Archive

Dubai: The Dubai Gold Price for 22K is now at its highest level since early 2013. It is now at Dh192, and breaking the Dh190 level set on January 2, 2013.

Chances are it will push higher, given the level of investor activity in bullion on Friday and Monday. On Monday alone, international bullion prices soared by more than $66 an ounce. It is now trading at $1,682 an ounce.

On Monday, the initial Dubai price was set at Dh189.25 a gram, and shoppers will also need to add another Dh9 a gram for VAT. By afternoon, it was revised to Dh192 a gram.


But gold traders say volatility is going to be a constant story for the metal in the coming days... as fresh fears erupt over the China virus and its spread around the world. And in times of distress, gold is the safest hope for investors.

Gold started Monday at the $1,643 mark, after an extremely brisk trade on Friday. when it gained more than $20 an ounce.

“Any movement of $8-$12 an ounce in the international price of gold brings about a Dh1 a gram change in Dubai,” said Cyriac Varghese, General Manager at Sky Jewellery.

Should jewellery shoppers in the UAE be worried? Most definitely... because if this level of increase continues, the value of a 22 gram in Dubai could end up very close to the highest ever it reached - Dh204 on September 6 2011.

For gold holders, it’s a win

But is there a way to make money for gold holders? Most certainly.

“Anyone who bought gold in, say, 2015, when the average price was $1,203 an ounce would have gained Dh40-Dh45 a gram if they came in to sell or exchange,” said Varghese.

“Gains would be there for those shoppers who bought even in 2018 or ‘17, when the highest point gold reached was $1,354 (in 2018) and $1,347 (in 2017).”

Gold retailers are pushing hard with schemes, reinforcing the message that gold is a “permanent” asset Image Credit: Gulf News

Now, if you were to strip away the Dh9 a gram of VAT, shoppers would still have made a decent return on their pre-2018 purchases of gold. (VAT in Dubai, at 5 per cent, came into effect on January 1, 2018.)

This is why retailers are pushing hard with schemes, and reinforcing the message that gold is a “permanent” asset.

Their message — jewellery designs will come and go... but the underlying asset’s value won’t.

A recent World Gold council report had this to say — “More than two-thirds of all retail investors believe that gold is a good safeguard against both inflation and currency fluctuations, and 61 per cent trust gold more than currencies. The industry should build on that confidence.”

Shoppers in UAE sure seem to be thinking along those lines — over the weekend, when globally gold gained $20 plus an ounce, retailers say they saw a spike in buying here.

Obviously, shoppers wanted to pick up whatever they could before prices could reach higher.

And smart thing too - gold’s up by nearly another $20 an ounce since Monday morning.

Big on exchanges and price lock-ins

UAE’s jewellery retailers are not sitting idle, waiting for prices to settle down — and they will at some point — for shoppers to return.

Jewellery exchange schemes are being pushed hard, and so are price protection schemes.

“We are providing customers with an opportunity to pay 10 per cent advance and get gold rate protection from February 24 onwards,” said Abdul Salam K.P., Group Executive Director, Malabar Gold and Diamonds.

“Through this, even if the price increases, they will be able to purchase for the same price at the time of booking. And if the rate reduces, they still get the advantage of the lower price.

“Gold has performed well as an investment in 2019 and the trend continues into 2020. On a retail level, business has been slightly affected due to the decline in tourist inflow and the initial hesitation of consumers owing to price increases.”

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Gold is a perma-asset, and the price increases since June last year only confirm its status. File picture of a shopper weighing options at a Malabar Gold & Diamonds store in Dubai. Image Credit: Gulf News Archive

Cash or jewellery?

But it will be the jewellery exchange promotions that retailers hope will click at a time when gold is pushing upwards. But for shoppers, there is an element of uncertainty about what they should do with the hold they already own? Should they exchange for new?

Or should they make a clean exit by selling for cash?

According to John Paul Alukkas, Executive Director at Joyalukkas Group, “We offer both options — with rising gold prices, more shoppers are interested in exchanging their old jewellery for brand new designs. For such shoppers, we provide exchange offer with zero loss in weight or value, meaning they can exchange their old jewellery at current market prices.

“Customers who are in need of cash and are willing to their sell their old jewellery, we do exchange it for instant cash... provided they have valid documents of their purchase.”

A note to shoppers - keep those documents on all gold purchases. You will never know when you need the cash.

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These days, holding gold is as good as having cash in hand. Retailers are going big with exchange schemes. File picture of a Joyalukkas outlet in Dubai.. Image Credit: Gulf News Archive

Shopper profiles

As long as the price of gold is lower in Dubai by 8-10 per cent over India’s, we will always have a ready market among visitors

- Anil Dhanak of Kanz Jewels

Apart from price rises, the virus outbreak creates another concern for jewellery retailers - will tourist inflows and buying see a hit? For now, Chinese shoppers are down significantly, but others are still heading for the Dubai Gold Souq.

“I’ll only look at the positive - as long as the price of gold is lower in Dubai by 8-10 per cent over India’s, we will always have a ready market,” said Anil Dhanak, Managing Director at Kanz. “That’s the Dubai promise... and it’s the only detail that matters.”