Gold retailers smile again
MANY CONSIDER IT SWEET RELIEF AFTER GOLD TRADE ENDURED ITS TOUGHEST QUARTER EVER
VAT refund for tourists offers sweet relief after trade endured its toughest time |
The UAE’s gold and jewellery sector endured its toughest quarter ever between July to end September, with demand dropping to 6 tonnes, a 13 per cent decline from third-quarter 2017, according to the latest update from the World Gold Council. Some of the “retailers registered losses for the first time”, the report adds.
“One cannot remember a quarter that has been this tough, at least not in recent memory,” said John Mulligan, Head of Member and Market Relations at WGC.
But the imminent introduction of VAT refunds for tourists could provide some much needed relief, according to jewellery industry sources here. “That (tax refunds) would be key to recovery — tourist-related buying of gold and jewellery in the UAE is down 30 per cent in the year to date,” said Abdul Salam K.P., Executive Director at Malabar Gold & Diamonds and board member on the Dubai Gold and Jewellery Group.
“All retailers are currently going through training ahead of the implementation of the refund scheme, which should be coming within days.”
Meanwhile, except for the Middle East markets, jewellery demand in most of the other key regions was on an upturn in the third quarter, WGC data shows. Overall global jewellery sales are up 6 per cent year-on-year, with China and India — the two key consumer markets — in positive territory. China accounted for 174.2 tonnes and up 10 per cent year-on-year, while India was also up by a similar margin to 148.8 tonnes. (Even the devastating floods in the southern Indian state of Kerala during August only had a marginal dent on demand, according to WGC.)
This sets up the platform for what could be an equally strong showing in the all-important fourth quarter.
“Apart from small pockets — due to geopolitical tensions or conditions particular to a country — consumer demand has been strong,” said Mulligan. “Gold has had a remarkably robust quarter, and also helped by widening support from central banks.”
Things could have been better if not for exchange traded funds (ETFs) in the US continuing to divest their gold holdings. And unlike the second quarter 2018, this was the case even with ETFs in Europe.
Even then, gold prices through the third quarter was less prone to volatility. In fact, in the last 30 days, there has been a 1.17 per cent gain in price, to $1,217.75 (Dh4,472) an ounce (as of 8.30am on November 1). (Over a one-year period, there is a decline of 4.91 per cent.)
As for prices in Dubai, it closed at Dh138.5 a gram for 22K on Wednesday (October 31) and rated as “favourable” in the run up to the Indian festival of Diwali on November 7. On November 5, there is ‘Dhanteras’, which Indian shoppers mark as the most auspicious day in the year to buy gold and other precious commodities.
Price advantage
According to Cyriac Varghese, General Manager of Sky Jewellery, “On a year-on-year basis, there is a price advantage, with gold now at Dh138 as against Dh146.5 last year. Sure, there is now the VAT element, which adds Dh7-Dh8 pergram.
“But jewellery retailers are trying to get shoppers back in with some of the most farreaching Diwali campaigns ever. At a price below Dh140, we are telling shoppers that rates are favourable.”
In the first four months, gold price here was above Dh150 a gram, while from August to date, it has traded below Dh140.
Jewellery retailers have had a tough time convincing their traditional shoppers because of the continued weakness of the Indian and Pakistan rupees.
“If we take the last five years, here have been several periods when gold prices could be deemed favourable,” said Varghese. “But at no point during this time did the Indian rupee go below Rs20 to a dirham. That’s the biggest challenge for the gold trade.”
UAE jewellery retailers are putting their weight behind coins and bars for Diwali. At Joyalukkas, shoppers stand a chance to win up to 1,000 gold bars, while those at Malabar stand a chance to get their hands on 250,000 gold coins. At Damas, shoppers can pick one 22K coin for every Dh2,500 purchase spent on gold jewellery. Kalyan is offering up to 500 coins.