With gold bars, UAE shoppers turn to 'value investing' despite record price

Dubai: More of UAE’s jewellery buyers are getting convinced – that when gold prices are this high, there’s value in gold bars. And coins too.

“UAE gold shoppers are ‘value investing’, because if they invest in a bar, they feel it offers them the best storage for value under current prices,” said a jewellery retailer. “We have seen a lot of that happening in recent days, and even lots of instances, where they are exchanging low value jewellery for gold bars.

“With tourists, we are seeing more of gold coin purchases.”  

Shoppers are getting particularly sensitive about high gold prices plus the making charges. With gold bar purchases, they don’t have to worry about that, nor do they pay for VAT.   

In recent days, gold prices crossed $2,950 an ounce for the first time, pushed its way to $2,956 and this morning is trading at $2,936. Hardly price levels seen as reasonable by jewellery shoppers.

“Most shoppers buying gold bars now are thinking about holding them for 2-3 years, even longer,” said the retailer. “The best part is that they can always exchange it for jewellery purchases when needed.

"Even those shoppers who bought low-design necklaces and bangles are shifting to gold bars. Anything to beat making charges and VAT."

Any sale of gold is good enough for retailers too, with bullion prices pushing on ever higher. The last few weeks have been particularly bruising for shoppers and retailers.

Just trace the path of the UAE gold rate during this period: if a gram of 22K was Dh309.25 on January 27, it's now at Dh331.25.

"There are a lot of younger buyers choosing gold bars or coins, and they want the physical gold rather than the 'digital' investments done through trading platforms," said a retailer. "Some are even making monthly or quarterly purchases right through the phase when gold kept adding $100 an ounce."

Over the last 12-24 months, UAE jewellery purchases have been decline, a direct result of the way gold prices kept hitting new peaks every few months.

Some of those buyers kept up with gold buying through online trading platforms, which continue to generate high volumes all through the recent period.

According to sources at trading platforms, some of the smaller gold retailers too have started sourcing their requirements through these channels.

All this is happening as gold comes within a few tens of dollars of crossing $3,000. Which will require gold shoppers and retailers to come up with new ways of handling their favourite metal.