NAT 191022 GOLD SHOPPERS AKK-7-1572088838795
Dewali gold shoppers at the Joyalukkas Jewellery in Burdubai. Dubai. Photo: Antonin Kélian Kallouche/Gulf News Image Credit: Antonin Kelian Kallouche / Gulf News

Dubai: Gold’s current high price levels are actually turning out to be a boost for demand among UAE’s shoppers, and taking jewellery retailers by surprise.

The sudden pick up in demand against all odds is not just that related to the usual buying ahead of Diwali, the Indian festival of lights, retailers say. “Because the last two months — when gold reached six-year highs — were exceptionally tough for retailers,” said Joy Alukkas, Chairman of the network that carries his name. “And then to see shoppers coming back this month even though prices haven’t dropped all that much, that’s a surprise. The best Diwali gift ever.

“It could be that UAE gold shoppers now are adjusting to prices at or slightly above $1,500 an ounce. And because they want to do some buying before it gets any higher. All the bets are on gold getting pricier.”

They have every reason to worry about more price gains, with some bullion analysts reckoning that gold is well in line to breach $1,700 levels next year. A situation quite likely if the world economy slips into a period of ultra-low growth … or even worse.

Which is why local gold shoppers are again picking up coins and bars alongside their traditional jewellery purchases — gold to them is the best “defensive” asset they can get their hands on right now. Current prices are 21 per cent higher than during October 2018. (On September 24, gold was at $1,534 an ounce and the local 22K at Dh174 a gram. On October 1, it was at $1,460 and the lowest level in the past month.)

From sellers to buyers again

All through the last two months, many in the UAE were actually selling their gold holdings and making quite decent profits for themselves. These were typically on 22K gold bought when it was at Dh120-Dh135 a gram levels and sold when the price had zoomed past Dh170.

“The UAE gold trade did see a sharp increase in consumers selling gold during September, because they had an excellent opportunity to cash in when bullion touched a six-year high,” said Shamlal Ahmed, Managing Director for International Operations at Malabar Gold and Diamonds. “But those shoppers are now making a return to buying — our internal records show that up to 60-70 per cent who sold earlier have since bought at one of our stores.

“It’s because gold seems to be the only asset that’s gaining these days — against last October’s $1,226 an ounce, it’s now at the $1,490 plus levels and could shoot up further. Compare that to stocks, property, currency — everything’s down.

“It’s also why we are now seeing an improvement in buying by tourists to the UAE for the first time this year. Gold at current prices are back in favour.”

According to Century Financial, a Dubai based consultancy, 24K gold in the UAE is likely to range between Dh178-Dh185 a gram during the week of Diwali. (On Thursday, it was listed at Dh181.)


Cyriac Varghese, General Manager of Sky Jewellery, calls the turnaround in shopper demand being helped by “gold’s credibility” as an asset for the long term. “In a way, each price surge helps because it convinces buyers that they have a valid reason to buy,” he said. “For too long, gold prices were subdued after 2011 (when it touched an all-time high of $1,923).

“This week’s improvement in demand was because gold had dropped below the psychologically important $1,500 level. Thankfully, it coincides with Diwali.”

UAE businesses go big gold promotions

UAE jewellery retailers offering gold coins and bars as promotions — no surprises there. But these days, it’s not them alone who are trying to get consumers to spend using gold-based promotions.

Be it car dealerships or electronics retailers, gold forms the basis of their current promotions.

So, if you were to head to the local Volkswagen dealer and buy a model, you can get gold vouchers totalling up to Dh20,000. If it’s a GMC SUV you have in mind, it improves your chances to win one kilogram in gold.

At Jumbo, offers include Dh200 in diamond vouchers and a chance to win four diamond pendants worth Dh12,000.

Then there is RAKBank with its “gold account”, where account holders can buy the metal using digital means. They can save in grams and which can be redeemed for physical gold at select RAKBank branches. Between now and January 9 next, anyone buying gold through the account stands a chance to pick up 1 kilogram of the metal.