UAE gold prices: Selling at 0% making charges daily is not practical, say jewellers

Dubai: Gold retailers selling at zero making charges in the UAE could end up harming the market long term even if they see higher sales now, according to top officials at the Dubai Gold & Jewellery Group.

Gold prices have again pushed past $2,900 an ounce, while the UAE gold rate for a gram of 22K is at Dh327.75. (The highest ever UAE gold rate for 22k was Dh331.25 on February 24.)

At these prices, gold choppers have become increasingly sensitive to what they are paying as making charges. In the last year and more, UAE jewelers had slashed making charges, ran special promotions offering making charges of under 2%, and more just to get shoppers comfortable with buying gold when prices are sticking to levels never seen before.

It is only in recent weeks that selling at 0% making charges has started to become noticeable in Dubai Gold Souq and elsewhere. This is being done only by small, single-store retailers, but such a trend could end up harming the wider retail trade, say jewellers.

This is when the issue of zero making charges started to crop up in the local jewellery sector.  

There are now a handful of smaller jewellery retailers selling at 0% making charge on a daily basis, the sources add.

These sales are outside of any promotions conducted by the retailers. (To launch promotions, retailers need to get approval from the concerned authorities in Dubai, and these are typically for a certain period.)  

“Going for zero making charges is not practically possible as there is a cost for any ornament in the form of labor and the (gold) loss that comes with any making of jewellery,” said Abdul Salam K.P., a board member of the Dubai Gold & Jewellery Group and Vice-Chairman of Malabar Gold & Diamonds.  

“If some retailer is offering at no-making charge, then they must be doing a clearance of outdated jewellery designs.

“(The vast majority of UAE) jewellers are offering attractive discounts on making charges to offset the cost to some extent.”

But such has been the upward shifts in gold prices that shoppers can easily be tempted to consider any offer for the lowest possible making charges.

Selling any jewellery at the price of just the weight of gold in it will see demand – but there are longer term consequences for the retailer. “Even if the jeweler has limited overheads compared to a branded retailer, it’s a high risk if they are constantly selling their merchandise at cost,” said a bullion trader.

Even a minimal design gold chain or bangle comes with some value-added labour - and that's a direct cost.

"Yes, some UAE jewelers are offering 0% making charges - but true artistry and quality come at a cost," said Arjun Dhanak, Director of Kanz Jewels. "It's important for buyers to understand that such pricing practices put immense strain on the manufacturing side.

"Skilled artisans, who are the backbone of this industry, deserve fair compensation for their craftsmanship. In the long run, sustainable pricing ensures both quality for the customer and respect for the people who create these beautiful pieces."

Others in the industry too are concerned that gold shoppers are being given the 'wrong message' through these zero charges.

"No business can survive without a margin built in," said a member of the Dubai Gold & Jewellery Group. "Every gold retailer bears the same level of costs when buying the same weight of gold, from which they make the jewellery. If the retailer then sells the same at the same cost he bought for, how's he going to survive?"