Dubai: The UAE gold rate continues to be near its all-time high of Dh235 a gram - but that’s not stopping shoppers from indulging in a few buys. And especially making use of the ongoing DSF and its raffle promotions.
Because gold continues to trade at eye-watering levels for the shopper. This morning, it’s at $2,063 an ounce, only slightly down from the $2,078-$2,086 levels in recent days. In UAE gold rate terms, that’s Dh231.75 a gram for 22K.
“There’s a lot of getting used to for buyers because a year ago $2,050 an ounce would have been peak gold,” said a bullion trader. “And now, these prices are being seen as a ‘relative bargain’ because gold had gone up to $2,147 just weeks ago.”
That’s some heavy adjustments shoppers are having to make. During DSF, tourist demand continues to be stable, jewellery retailers say, because buying gold in the UAE continues to give them significant pricing advantages compared to their home market. (In India, for instance, the same would be more than 10 per cent higher, keeping in mind the import duty, the GST factor, etc.)
Making charges involve procedures resulting in an unrecoverable 5-6 grams of gold loss with every 1 kilo gold used.
Even those shoppers who had delayed their purchases for upcoming weddings when prices had cleared $2,100 levels are back in the gold market. Again, the sentiment is buy now and increase their chances of emerging a DSF winner. That, UAE jewellers say, is the biggest 2023 year-end 'gifts' the gold trade received.
Clearly, this year’s DSF gold promotion has been serving its purpose well and good.
Making charges - how low can it go?
As for UAE resident shoppers, they are trying their luck with the DSF raffle promotions. These shoppers are predominantly drawn from the mid- to high-end consumer base, the sort who will keep adding to their gold collection.
“If anything, gold’s price rise has showcased its enduring appeal as a prized investment commodity,” said Anil Dhanak, Managing Director at Dubai-based Kanz Jewels. “We’ve observed a significant surge in purchases, likely due to the DSF drawing in many travellers.” (Incidentally, one of the winners in the DSF draws was a shopper at Kanz.)
Shoppers have also been seeing gold retailers pushing heavily subsidised jewellery, with making charges cut by 25-50 per cent. This too has been a major draw at a time when gold is holding well over $2,000.
Over-use of heavy discounts will hurt the gold trade. The ones who will lose out are the retailers...
But there are limits to how long retailers can keep offering making charge discounts. “These can at best be limited time offers, because it’s from the making charge margins that jewellers have to pay for the higher rents on their properties, staff salaries, and the general cost of their operations,” said Abdul Salam K.P., Vice-Chairman of Malabar Gold & Diamonds.
“Over-use of heavy discounts will hurt the gold trade. The ones who will lose out are the retailers, because shoppers will still be getting price gains from holding gold.”
Dhanak too warns – strongly – against using discounts on making charges as a way to lure shoppers. “Any further reduction will pose increasing challenges,” said Dhanak. “Making charges involve procedures resulting in an unrecoverable 5-6 grams of gold loss with every 1 kilo gold used. If any retailer offers making charge discounts on top of this, he’s asking for trouble.”
$ 205 an ounceDifference between current gold prices and what they were a year ago
Get smart with jewellery collections
More jewellery retailers realise that steady month-on-month sales might not be possible if gold keeps treading $2,000 plus levels consistently. That tourist shoppers are relatively comfortable with current rates has come as a fair bit of surprise - "With the current DSF offers, these shoppers are getting that additional percentage on discounts, including on making charges, compared to their home markets," said a jeweller. "Buying gold in Dubai and UAE always has that 'percentage plus' benefit for tourists. This is why they adapted so quickly to $2,500 prices."
What we have observed is that travellers to the UAE are capitalizing on the situation. We are actively exploring the introduction of fancy entry-point gold jewellery collections.
Retailers are also mixing and matching their collections. Prices too hot for most? Then offer them entry level collections with in-built lower making charges.
"What we have observed is that travellers to the UAE are capitalizing on the situation," said Vinay Jethwani of Meena Jewellers. "We are actively exploring the introduction of fancy entry-point gold jewellery collections.
"Shoppers continue to express unwavering trust in gold as an investment."
This DSF, a lot of them sure are buying that argument. Still not convinced?
Then check this out - in the last 12 months, gold is up by $205 on an ounce basis...
More to follow...