Demand for gold spikes
Jewellery outlets across the UAE have been reporting an exceptional increase in footfalls in the run up to Diwali, spurred by attractive gold prices, festive shopping spree and a desire to own more of the yellow metal before an impending VAT-driven price escalation.
Jubilant traders in the “City of Gold” expect the ongoing gold rush to reach a fever pitch in the next two days as Indian expatriates celebrate the “festival of lights.”
“Diwali is an important occasion for Indians and for several Indian expatriate communities here, it is an auspicious occasion to buy gold. Hence, we foresee a brisk sales season ahead,” said Tawhid Abdullah, chairman of Dubai Gold & Jewellery Group.
“Price is still at affordable levels and due to the comfortable pricing of gold, we expect substantial rise in footfalls and sales this season,” said Abdullah, the head of the influential jewellery traders’ group. Asians, predominantly shoppers from Indian sub-continent, constitute the largest chunk of jewellery consumers in the UAE.
Most retailers reported that sales had jumped between 10 and 25 per cent in the run up to the festival. Joy Alukkas, chairman and managing director, Joyalukkas Group, said: “This could be due in part to the implementation of GST in India and the overall consumer belief in gold as a solid long-term investment. ”
“We are now expecting up to 30 per cent increase. However, on the day of Danteras, we expect over 400 per cent increase in sale as compared to a normal day,” said Shamlal Ahmed, managing director, international operations of Malabar Gold & Diamonds. He added: “We expect this trend to continue beyond the Diwali season until January/February 2018.”
Shamlal said while the jewellery trade is awaiting clarity regarding VAT and its implication on jewellery business in UAE, for buyers, the current gold price levels are attractive and they are taking advantage of it.
T.S. Kalyanaraman, chairman & managing director, Kalyan Jewellers, said: “While there is a robust demand for gold jewellery, there is an increasing interest in customers for studded stone jewellery and uncut diamond jewellery. We expect a 10 per cent to 12 per cent increase in sales compared to last year.”
Kalyanaraman said a dip in the prices of gold (one per cent as compared to last month) and the anticipated escalation in price due to VAT could be contributing factors for the remarkable upswing in sales. “We believe that the festive season followed by the wedding season are also contributing to the demand,” said Kalyanaraman.
Alukkas group chairman added that the jewellery trade was not seeing any additional escalation based on the VAT effect in January. “The sale trends are in line with the demand we usually see during festivals like Dhanteras & Diwali.
“We feel the impact of VAT on jewellery prices is not going effect the demand for jewellery, since the price difference will be very nominal. There could be a small impact during the first month since some customers would like to wait and watch, however this is not expected to last long.”
Mihir Kapadia, CEO and founder of Sun Global Investments, and emerging market investment expert, said Diwali and the festival season always see strong demand for gold buying in India as well as in the UAE.
“This seasonal demand has been a major factor in the pattern of gold demand for at least two decades and we expect this year to be no different. However, we do not except it to boost prices significantly as the overall market is subdued,” Kapadia added.
With the current prices at a low and with the festive season round the corner, it is natural to expect a higher consumer demand.
issacjohn@khaleejtimes.com