Dubai: The recent decline in the price of gold has sparked excitement among UAE consumers who are raring to hit the shops over the next few days to score some bargains.
The rush to stock up on the yellow metal is already building up, with retailers saying they have received a number of calls from customers asking for the latest gold prices.
Gold jewellery buying is deeply ingrained in the culture of many expatriates working in the UAE, particularly those from Asian countries like India and the Philippines.
They consider storing gold ornaments as a form of investment or personal saving. To many of them, gold doesn’t just promise security and excellent returns, it acts as an emergency fund – something that can be quickly converted into cash when there is an urgent or unexpected bill to pay.
The bullion tumbled below $1,100 an ounce to five-year lows this week, as oil prices fell to $50 a barrel, fueling fears about the state of the global economy.
Gold’s decline has been attributed to the United States Federal Reserve plans to hike interest rates this year. US Federal Reserve chairman Janet Yellen has recently suggested that there are some valid grounds to increase interest rates by the end of the year.
Ironically, it is when the bullion loses its shine that many gold fans rejoice. The low price environment provides an opportunity for them to acquire more gold so that they can resell it for a much higher value when prices go back up.
Gold fans
Jenifer Pinto-Suares, an expatriate from India, says she is excited about the news, adding that she intends to visit the gold shops before the weekend to avoid the rush.
"I am definitely buying gold now that the price is low. I bought gold a few months ago, but now I wish I had waited and saved a lot more," Suares tells Gulf News .
Suares buys gold jewellery several times a year, especially when there is a special occasion. She also considers buying gold as a form of investment.
"As an Indian, gold is synonymous with culture, pride, wealth and savings. Gold as a gift to your loved ones during important occasions is quite common and buying gold is also looked at as a very good investment. What goes down will one day go up and then you make a killing."
Another gold buyer, Joven Reyes from the Philippines, says he can't wait to buy a new piece of necklace now that the price has dropped significantly. "I keep checking the prices regularly, about twice a month. Now that the gold is cheaper, I'm so excited. I want to buy a new one. "
"The good thing about buying gold is that you'll make some money in the long run. It's a form of investment," he adds.
Unlike Reyes and Suares, however, some gold buyers are keeping a wait-and-see attitude.
Antijoy Olattopurath Antony from Pakistan spends Dh2,000 with every gold purchase. "I buy mostly chains and bangles. I like buying gold jewellery because it is a good asset and it can be liquidated very easily when you're in need of cash," he says.
However, even with the price of gold dropping to its lowest in five years, Antijoy isn't tempted to go to the shops yet. He says he will wait for the prices to drop further. "I will wait because I heard that gold prices will go lower than ever in the last ten years," he says.
Buyers
Gold jewellery retailers in the UAE, however, say there have been plenty of people taking advantage of the low price. As more buyers are expected to flock to the stores over the next few days, sellers are anticipating their sales to increase by as much as 20 per cent this year.
"We area already experiencing a significant uptake in gold jewellery sales, not just in Dubai but all over the whole GCC region," says Karim Merchant , Group CEO and managing director of Pure Gold Jewellers .
Tawhid Abdullah, chairman of Dubai Gold and Jewellery Group, says the sharp decline will translate into incremental sales if it sustains for a few days.
"We are yet to see if the sudden decline has encouraged retail activity substantially. It is too early to draw any conclusion," he says.
Sceptics
However, is this fuss over the shiny, yellow metal really worth it? Is buying necklaces, earrings, bracelets and bangles the best way to make money out of gold? Can it provide returns higher than mutual funds, stocks or property?
Christoph Bardeau, an expatriate from France doesn’t think so. “I don’t understand what the fuss is all about. People tend to forget that they end up spending more money if they buy jewellery because they pay for the making charges. It’s not an investment,” he says.
“What is more logical is to buy gold bars or coins. You can resell these for some profit when the right time comes,” the IT professional says.
Financial advisors say there is indeed no income to be made from gold ornaments. Unlike gold coins and bars, jewellery carries additional charges that makes it more expensive to buy in the first place. The additional costs also mean the buyer may not be able to recover the capital even when the prices go up.
“Without income, an investment relies on capital gains alone, and too often, losses can be taken instead of gains. Without income, there is little chance of beating inflation as it is the combination of growth and income that defeats inflation,” says Steve Gregory, a financial planner.
Charges
Jewellers normally collect charges to recover the labour cost of crafting a shiny necklace, ring or bracelet out of raw gold. Then there are ‘wastage charges’ to cover for the amount of gold that is wasted when the precious metal is cut, melted or soldered.
When it’s time to “cash” the most prized possession, the jeweller might not repurchase it based on the spot gold’s current market rate, because he will likely quote the wholesale rate or deduct the making and wastage charges from the price. The wear and tear on the jewellery can also depreciate the resale value.
Money experts say it is important to take these considerations into account before choosing jewellery as an investment vehicle. If low-income residents really have to buy into the craze, the least they could do is ask their vendor if they can guarantee that they will repurchase the item without chopping off the making and wastage charges. Opting for unique design and good quality might also help fetch a good resale rate.
.
