Gold rush 2
Regardless of high or low prices, gold shops are full of customers not just looking for jewellery but also to buy gold coins or bars. Image Credit: Gulf News Archives

Highlights

  • Why is gold so popular among UAE residents?
  • Is it a myth that gold is a smart investment?
  • Does it matter whether you invest in jewellery or bars and coins?

Dubai: Diamonds maybe a girl’s best friend, but, for some, gold’s the clear winner.

Regardless of high or low prices, gold shops are full of customers not just looking for jewellery but also for a smart way to invest a few thousands in the form of gold coins or bars.

Huda Tabrez and Shreya Bhatia

Gulf News spoke to some UAE expats who love to invest in gold, to find out why they buy the yellow metal.

It is considered auspicious

According to Afshan Hunaid, a Pakistani expat based in Sharjah: “For South Asians buying gold is culturally considered auspicious in the region. So, on different occasions we buy gold.

“For South Asians buying gold is culturally considered auspicious in the region

- Afshan Hunaid, Pakistani expat

A good way to save

The Pakistani businesswoman added: “It’s also a form of saving, as the resale value of gold is good, you can sell it anytime, anywhere, you don’t lose more money as compared to jewels.”

Her relatives and friends have always used gold as a means to save up: “I have seen my grandmothers and older relatives in the olden days buying a lot of gold so they have something for rainy days to come. They have tried to pass down the habit and teach me the tactics too. However, I haven’t passed down the habit to my children.”

Afshan feels that diamonds can be a good investment only if they are bigger in size and of a good quality and cut. She however added: “Unlike gold, diamonds cannot be sold anytime, anywhere without losing much money.”

Indian expat, Vidya R. agreed: “Diamonds may make you feel rich, but to me they are not as precious as gold. Whenever I go to a jewellery shop, I notice, it is easy to get discounts on diamonds but never on 22 or 24 carat gold. I didn’t know much about the value, but this pattern was enough for me as a buyer to conclude that yellow gold is more precious and worth more than diamonds. The liquidity of gold is high.”

A safe investment in the long run

The 35-year-old human resources freelancer added: “I have invested in coins in the past and that helped me later. When my husband and I were in a dire financial emergency, we were able to use our gold before thinking of borrowing. I would suggest if you are not very keen on jewellery, at least buy coins. On any given day, I would prefer to spend my spare money on a gold coin instead of a latest expensive phone. I have always benefited from my gold purchases.”

I would suggest if you are not very keen on jewellery, at least buy coins. On any given day, I would prefer to spend my spare money on a gold coin instead of a latest expensive phone.

- Vidya R., Indian expat

Love for the precious metal

Vidya feels gold is beautiful. She added: “It is an investment method that you can enjoy and utilise later. I feel gold jewellery makes a statement.”

Gold Rush 1
For some, the love for jewelry encourages them to invest in gold

Lavina Q, a Dubai resident also loves gold. She said: “I was always fond of gold and used to buy a lot of gold jewellery. It was never with the intention to save. It was only because I loved wearing it.”

The value increases

Sharjah expat Vibitha Sanjith agreed: “Usually we buy gold especially, coins, as investment so that we can exchange it for money when the need arises.

Gold Rush 3
Jewellery is not the only option. Some expats use savings to invest in gold coins and bars. Image Credit: Gulf News Archives

She feels that gold is a good commodity to invest in: “When we exchange gold, usually the jewellers buy the gold as per the current rate. It may have been bought at a lesser rate. If you consider the last 20 years, you notice that the rate of gold has increased tremendously, so, I hope it will increase in the future too.”

If you consider the last 20 years, you notice that the rate of gold has increased tremendously, so, I hope it will increase in the future too.

- Vibitha Sanjith, Indian expat

Gold can be used for more than selling. The 34-year-old Claims Auditor added: “It’s not just useful for selling but also to use as a collateral for a loan.”

In India, gold loans are common. The process involves a customer pledging gold as collateral for taking a loan. The bank or the lender uses the gold as security against potential payment default by the customer. The loan amount sanctioned is a certain percentage of the value of the gold that has been pledged.

Is the trend declining?

According to Mahmoud Qazi, a 57-year-old manager at a travel and tourism company based in Dubai: “These days people prefer buying property and investing in bonds as a form of saving. I think that the culture of buying gold as a means to save is reducing, at least amongst Pakistanis. Back in the 70s’ for example, people used to buy gold from the Arabian Gulf, from countries like the UAE and Kuwait, and sell it in Pakistan because the prices there were very high. Now, the prices have standardised.”

Gold can be sold hassle free

However, Qazi said that the good thing about gold is that you can sell it at any time: “and there’s no need for documentation most of the time, unlike dealing with property.”

... the good thing about gold is that you can sell it at any time and there’s no need for documentation most of the time, unlike dealing with property.

- Mahmoud Qazi, Pakistani expat

He feels this is the reason groups earning low incomes still seem to invest in the metal. Qazi added: “Especially in our culture, they think that they can use it when they marry off their children or use it during bad financial circumstances.”

Financial expert’s comment

Is it a smart decision to invest in gold?

According to Jason Cook, a financial expert based in Dubai: “Yes, right now gold is a smart investment. The yellow metal is considered a store of value, a safe haven asset, so when investors foresee trouble ahead generally the price of gold goes up. At the moment there are many factors indicating gold could perform very well in 2020.”

Yes, right now gold is a smart investment. The yellow metal is considered a store of value, a safe haven asset, so when investors foresee trouble ahead generally the price of gold goes up.

- Jason Cook, a financial expert based in Dubai

How much is too much?

Cook added: “Consider how much you buy. The problem with holding too much gold is that if the price doesn’t go up, at least in line with inflation, you are not making money. Holding physical gold produces no income, and it may cost you to keep it somewhere secure. So you could end up losing purchasing power. This is why when the economy is good investors look elsewhere for a return and the price of gold stagnates or goes down.”

Is it a myth that gold is a smart investment?

Cook says it is not a myth: “Gold has been a form of currency for millennia, it is almost as liquid as cash, in that there is always a market for it somewhere, its price is relatively stable and its something you can hold, unlike a cryptocurrency for example.”

What are some other simple ways to save and invest?

Cook advises that investments should only be approached when you have these three basic pillars of financial security: “You own a property, you have an accessible emergency fund three times your monthly outgoings and adequate life insurance to protect your families way of life if the worst happens. Once your household is financially secure then you can start to look at investing for the future. National bonds and term deposits are a great way to get low risk returns. Steer clear of expensive regular savings plans offered by insurance companies. If you want to invest into anything else consult a regulated and qualified financial professional.”