Dubai: Shoppers in Dubai will have more prizes on any purchase of gold and diamond jewellery this Dubai Shopping Festival, which starts December 26.
This way, Dubai’s jewellery retailers are trying to bring back buyers after five tough months in which gold prices shot up to six-year highs.
“More prizes mean more reasons for shoppers to return – thankfully, gold prices have dropped in recent days and that itself is an incentive to buy,” said Abdul Salam K.P. Executive Director at Malabar Gold & Diamonds and board member at Dubai Gold and Jewellery Group.
“It was a tough promotion to put together because gold prices had gone up quite appreciably in recent months. Shoppers are increasingly reluctant to shop for gold when there are no promotions.
“If they are buying jewellery with a high gold element, they also expect retailers to compensate on the making charges. So, higher gold prices end up cutting into retailer margins as well.
“This is why this DSF we needed to get everything right – the offers have to be attractive enough for shoppers. At the same time, allow us some flexibility on margins.”
The total value of DSF gold prizes, however, remains unchanged at Dh4 million. (The biggest ever gold promotion during DSF was in 2015, when the overall prize money was valued at Dh15 million.)
This DSF, the Gold and Jewellery Group has also decided to once again have a unified promotion on both gold and diamond jewellery. “That’s because running two separate promotions – as was the case last year - was proving difficult from a logistics perspective,” said Salam. (Diamond jewellery typically makes up about 20 per cent of sales during DSF promotions.)
“In recent days, we have seen more shoppers – residents and tourists - at jewellery stores, and if gold prices remain at current levels or, hopefully, drop further, we can get a lot of the pent-up demand,” Salam added.
Prices turn favourable
On prices, Salam makes a valid point. On Friday, 22K gold was quoting at Dh168 a gram, quite a decent dip from the Dh176 a gram (on August 29) that was the highest in the last six months. On May 21, it was at Dh145 a gram - and that sums up the dilemma gold shoppers and retailers have been facing in the last six months. (On an ounce basis, gold had peaked at $1,543 against the $1,478.99 an ounce it was trading early on Friday. For comparison’s sake, gold was at $1,263.6 on December 20, 2018.)
“If buying activity improves this DSF, the gold trade will reclaim some of the sales lost since June 20, which is when prices started creeping up,” said Cyriac Varghese, General Manager at Sky Jewellery. “The entire summer holiday buying of June-July was brought to a complete halt because of that. The three months thereafter was just as bad, except for a brief demand gain during Diwali in October.
“This has been the worst phase for the gold trade in UAE in nearly a decade. Hopefully, the combination of softening gold prices and promotions during DSF 2020 will help recover some demand.”
Tourists are buying
Market sources say that tourist-led buying has definitely improved in the last two weeks, especially those coming from India. In July, India had raised its import duty on gold to 12.5 per cent from 10, and this has worked to UAE’s jewellery retailers’ advantage.
“Indian tourist demand could have been higher if it were not for the increase in gold prices during this period,” said a market source. “But with prices settling, these visitors are back to buying in Dubai.
“There could be more of it if the Indian government decides to raise the GST (Goods and Service Tax) on gold jewellery from 3 per cent to 5, as has been speculated for some time.”
India is the second largest consumer of gold after China, and the country uses quite a bit of its dollar reserves on gold imports. Any hike in GST could dampen demand for the metal within India.
But so far, no such move has been communicated officially by the Indian government, or the GST Council, which sets the rates. But gold buying has always had an element of speculation about it, and the UAE’s gold retail sector can definitely benefit from any talk of a future GST hike on gold.
If such talk helps boost purchases during DSF 2020, then all the better.