In Pictures: Treat your next gold purchase the same way as buying a stock

Are you planning to buy gold jewellery and suddenly find that prices have shot up? Then, it is time to start thinking of buying gold in the same way that you would buy or sell on the stock market. And it’s pretty straight forward.

The intention is to buy when gold prices take a dip, which is exactly what smart investors have been doing on stock markets since ever. Because gold prices have in recent weeks gained - or dropped - by Dh5-Dh10 a gram, making it difficult for shoppers to time their purchases.

To offset this, here's what the shopper has to do. Assume the price of gold today is at a level comfortable to the shopper, at, say, Dh202 a gram. If the shopper doesn’t have the funds available to make a purchase now, or doesn’t want to use the credit card, he just needs to connect with a jewellery retailer.

The shopper can tell the retailer that he will buy at today’s rate, but within two to three months. This means even if gold prices rise above Dh202 a gram during this period, the shopper will be protected. And if the price drops below Dh202 a gram on the actual day of purchase, he or she can buy at the lower price.

The strategy is as simple as it gets – lock in the next gold shopping at a lower rate, and the only thing you need to be sure of is make the promised purchase in the two to three months.

For shoppers, it makes sense to think of lock-in buys. Just recently, the Dubai Gold rate dropped by Dh5 a gram in just over 24 hours from Dh210.

“More UAE jewellery retailers are offering this price protection scheme – it assures shoppers they are buying at a price they are OK with,” said a retailer. “For the retailer, it means a purchase will happen – and these are usually big-ticket purchases.”

Advance price lock-in was never popular when gold was in the Dh170-Dh180 a gram range. But since January 1, 2020, gold prices have reached levels that have made it difficult for many regular buyers. Gold during this period has touched all-time highs, at $2,074 an ounce in August 2020, and for the most part remained stuck in the $1,800 plus levels for the better part of these two years.

Sure, there have been occasion dips below $1,800, to about $1,750. Each time the dip has happened, it has not been a prolonged one.

This is why shoppers could consider a price lock-in ahead of key gold buying phases, such as the Indian festival of ‘Akshaya Trithiya’ (which will be marked next month) or Diwali during November.

“Gold price lock-ins are not new, because retailers used to provide an informal one-month period during which they could buy at a lower rate,” said the retailer.

Extending that one-month to up to three months will give shoppers more flexibility to time their gold purchases, whether it’s a fancy piece of jewellery or bars and coins to top up their yellow metal holdings. Only a handful of UAE jewellery retailers offer up to three months on price lock-ins, but more could join in with gold sticking adamantly to $1,800 plus levels.

Here's the lesson for UAE gold buyers – bring some of the basics of stock market investing to your shopping for the metal. Those few dirhams of difference on a gram can work out to quite a bit for you on the final bill. And those savings can even be the foundation for your next trip to a jeweller.

Or wait until March to see what the US Federal Reserve has in store for you. The upcoming interest rate hikes will mean some softening for gold prices from current levels. UAE gold shoppers can keep hoping until then.