With gold around $2,500, UAE shoppers are in a rush to buy high-price jewellery through trade-ins

They have every reason to feel this vibe if they are holding gold they bought while prices were at Dh200 a gram or under levels. In short, they want to ‘trade up’. For instance, if they bought gold during late October of 2022, during Diwali, they would have paid Dh205 a gram. Or if they had delayed their purchase to early November 2022, it would have cost them Dh201. (Bullion prices then were at $1,619 levels.)

Gold reaching the $2,500 plus level has created ‘fresh momentum in the UAE jewellery market’, said a retailer. “The mood among shoppers is clear – use old for new gold. A shopper who earlier would not even consider a Dh10,000 or over necklace has no such price inhibitions now. It’s instant trade-in.”

Or trade up.

Tourists too join in 

This is not just happening with resident gold buyers. Jewellery retailers talk about visitors to the UAE coming from India and Pakistan coming to their stores exchange schemes. But it’s not just about shoppers from the Subcontinent. Saudi and other GCC nationals are trading in, as are shoppers from North Africa, whether resident or tourist.

Clearly, gold at $2,500 has opened up new possibilities for gold owners. It’s breached a psychological mark, and that’s what is being reflected at the retail level. (UAE jewellery sales have been declining for the last 4-6 quarters, according to official data. The current gold exchanges when bullion is at $2,500 levels is more of a temporary phenomenon.)

UAE gold jewelers are quick to cash in on the trend. “We are indeed observing a significant increase in shoppers choosing to trade in old jewellery for new pieces,” said Joy Alukkas, Chairman of the jewellery network.

“This trend highlights a growing commitment at value retention among customers. What we do is facilitate the process by offering competitive exchange rates and minimal deductions, making sure customers can refresh their collections.”

What we're seeing now is gold climb to Dh302.75 a gram for 22K, influenced by ongoing geopolitical tensions and economic shifts. This highlights gold’s enduring role as a safe haven.

- Joy Alukkas of Joyalukkas Jewellery

Gold has not seen anything like this before. In the first 6 months of 2024, gold cleared $2,200, $2,300 and $2,400 an ounce for the first time. And then last week, it breached $2,500.

Shoppers who had been staying away from buying – or reduced the size of their purchases – do seem to have been triggered. Those who had been holding back from exchange programs in recent years suddenly wanted to trade up.

“That’s why trade-ins remain one of the most popular methods to purchase jewellery,” said Shamlal Ahmed, Managing Director for International Operations at Malabar Gold & Diamonds. “As part of our ‘Malabar Promise’ scheme, we offer 100 per cent value exchange on gold jewellery, providing the option to exchange for the latest designs without any loss in value.

“Now, we have extended this exchange policy to cover our diamond jewellery as well, meaning even diamond lovers can keep pace with trends without worrying about loss in value.”

With the value-appreciating nature of gold as an asset, customers who wish to stay updated with the latest jewellery trends can cash in on their old gold.

- Shamlal Ahmed of Malabar Gold & Diamonds

Until during the Covid year of 2020, each time gold prices shot up, they would then go back to settling down at $1,600-$1,700 levels. Even during the Global Financial Crisis of 2008-2011, gold shot up to then record levels of $1,900 plus. But that was relatively a temporary phase.

The current high price stretch since 2020 is thus unprecedented. And the last time gold had seen $1,900 an ounce levels were during October 2023. This year has all been about reaching out to new highs.

Will high gold price reverse?

There aren’t many who foresee an immediate price drop. And when analysts talk about price declines, they limit the range to around $2,000-$2,200. But the majority still see gold as having room to move up further.

What's truly striking is also the rising number of customers opting to hold onto their existing gold…

- Ramesh Kalyanaraman of Kalyan Jewellers

Some shoppers still prefer to ‘hold’

"(While) we've noticed a marked increase in customer inquiries about gold rates and buyback values, what's truly striking is the rising number of customers opting to hold onto their existing gold,” said Ramesh Kalyanaraman, Executive Director, Kalyan Jewellers. “This reflects recognition of gold as a stable, long-term asset. (And) we are also seeing an uptick in customer walk-ins for fresh purchases."

Clearly, for these buyers, even $2,500 is not a barrier. And they may be setting themselves up for gold price to head higher…

While the sudden price fluctuations may impact an immediate reaction, that’s temporary and it stabilises

- Aditya Singh, Head of Business, Tanishq