Customers at a jewellery store in Dubai. UAE jewellery and investment demand in 2016 is close to its lowest since 2001. Image Credit: Ahmed Ramzan/Gulf News archive

Dubai: For Suresh Massand, owner of Royal Jewellery in Dubai, 2016 has been a tough year, but he hopes to make better sales next year.

“Sales have been marginally lower in 2016 compared to previous years. Margins have come down because of competition, and we need to work harder as ever to achieve the same income,” said Massand, who is a first-generation jeweller in Bur Dubai.

Even the data from Thomson Reuters GFMS subtantiates this argument.

In 2015, UAE imported approximately 30 per cent lower jewellery in value at $11 billion (Dh40.39 billion) as compared to $15 billion in 2014, the trend is likely to extend into this year as well, according to Sudheesh Nambiath, Lead Analyst - Precious Metals Demand for South Asia and UAE, GFMS Thomson Reuters.

In the UAE, third-quarter jewellery offtake was a marginal 7.8 tonnes and down from the 15.3 tonnes in the second quarter and 11.1 tonnes in the first.

UAE jewellery and investment demand together for this year is likely to end at the lowest level since 2001. “However, we think demand in UAE has hit the bottom of the cycle and could revive next year,” said Nambiath.

Even Massand is hoping to clock better sales next year.

“The sales from tourists have been on decline after demonetisation, but residents have been filling in that gap,” said Massand.

Residents in the UAE prefer to buy jewellery locally due to absence of any tax. The price difference for 22-carat jewellery is about 2,500 Indian rupees per 10 grams, and the arbitrage essentially comes from a 10 per cent import duty on gold bars in India.

“Higher duty in India will keep the arbitrage open for Indians working there. Additionally the crackdown on undisclosed income in India will encourage Indians in UAE to rather buy jewellery there than buying in India,” said Nambiath.

Not only in the UAE, demand globally has also taken a beating.

In the latest World Gold Council update, overall demand during the third quarter of 2016 was 993 tonnes, a quite significant dip by 10 per cent compared to the 1,105 tonnes in the same period last year. And with gold prices averaging $1,334 an ounce during the three-month period, total consumer demand had a sharp 26 per cent decline to 683 tonnes from 917 tonnes in the same quarter last year.