190502 gold prices
Gold ornaments on display at a store in Dubai's Gold Souk. Image Credit: Zarina Fernandes/Gulf News

Dubai: UAE’s gold jewellery sales were up 6 per cent in the first three months compared to a year ago – enough to give a glimmer of hope to retailers. In fact, the 10.7 tonnes they sold is the best quarterly performance since Q4-17, when shoppers picked up 11.1 tonnes of jewellery pieces, according to World Gold Council data released on Thursday.

The DSF-focussed campaign by jewellery retailers in January also had a hand in the improved sales. But with gold prices “oscillating” at around the $1,300 an ounce mark, more UAE shoppers are adopting a wait-and-watch attitude on when and how much they should buy. However, concerns that gold prices will steadily push well past the $1,300 mark seem unfounded… at least for now.

On the plus side, local shoppers have also adjusted to paying 5 per cent VAT on their gold purchases. “There was a bit of buying resistance when VAT was brought in early 2018 and did impact on Q1-18 sales (10.1 tonnes),” said John Mulligan, Head of Member and Market relations at WGC. “So, a 6 per cent increase from those levels does suggest an improvement in sentiments.”

Local jewellers add that things could have been better if there were more tourists buying gold in the first quarter. “But there is a sharp drop in sales to them; even Chinese visitors seem to be on a budget and that was never the case before,” said Abdul Salam K. P., Group Executive Director at Malabar Gold & Diamonds.

Read More

“Typically, in a good quarter, sales to tourists would make up 20-25 per cent, but in Q1-19, as much as 85 per cent of gold sales happened with domestic shoppers. I believe the current price levels are holding back buyers.

“Even the average sales value per transaction has come down to about Dh3,000-Dh3,500 from around Dh4,500-Dh5,000 in 2016-17.”

Late last year, the UAE allowed full refunds on the VAT portion to purchases made by tourists here. In fact, the local jewellery sector was expecting this to spark increased buying support from overseas shoppers – so far, this has not panned out.

According to the WGC report, there could be other reasons holding back demand from tourists, especially those from India. “The VAT refund offered to tourists in the UAE has only seen limited take-up: in particular, Indian tourists are reluctant to claim in case their information finds its way to the Indian tax authorities,” the report adds.

By the looks of it, shoppers back in India had no such qualms – “There were far more auspicious days during the first quarter than was the norm, and this was mirrored in demand for jewellery as well as bars and coins,” said Mulligan.

There were 21 auspicious days considered ideal for weddings in the Hindu calendar during Q1-19 – and that’s three times that in Q1-18, the report finds.

Even India’s central bank is committed to gold, having picked up bullion consistently over the last 13 months. In this, the Reserve Bank of India is not alone – central banks from just about everywhere were stocking up on their yellow metal reserves. Together, they bought 145.5 tonnes in Q1, up 68 per cent on the same period in 2018 and “representing the strongest start to a year since 2013”.