The sharp drop in gold prices is driving consumers in droves to outlets selling the yellow metal in Dubai and Sharjah. The majority of shoppers queuing up in front of jewellery stores, mostly in the Meena Bazaar and the gold souk (market) areas in Dubai, are Indians, with a sizeable segment from Kerala.
“Unlike the Chinese-driven Singapore, the Dubai market is dominated by Indians,” says Sanjeev Jain, president of the Jain Social Group, a conglomerate of gold and diamond traders. Dubai merchants say their sales have shot up by 400 per cent after the recent price plunge.
Unsurpringly, the consumption pattern reflects typical Indian preferences. The majority of Indian consumers in Dubai do not prefer paper gold in the form of Exchange Traded Funds (ETF), despite its obvious advantages — greater security because physical transactions are not involved, as well as the convenience in trading the yellow metal on exchanges that are spread worldwide, including Mumbai.
Gold coins and bars have also been sold, but the bulk of the purchasing since the prices fell has been in the form of jewellery. “The sharp drop in prices has coincided with the marriage season in Kerala that starts from July. That is one of the significant contributory factors driving up demand,” says K.V. Shamsudheen, director, Barjeel Geogit Securities.
Mr. Shamsudheen points out that large quantities of gold from the United Arab Emirates are flowing into Kerala. “Though it has only 3 per cent of the population, Kerala consumes 20 per cent of India’s gold,” he says.
The lustre of gold jewellery bought from Dubai has been a factor that has persistently boosted sales. “Unlike many other places, Dubai gold is reinforced with silver during the manufacture of diamond jewellery, which explains its lasting lustre,” says Mr. Jain.
The restrictions on individuals bringing gold into India have apparently not dampened the spirit of the shopping binge. The random security checks Customs officials carry out at most Indian airports hardly seem to deter passengers from arriving with fairly significant quantities of gold. Nevertheless, the Pravasi Bandhu Welfare Trust in the UAE is running an online petition that is seeking tax exemption for 100 gm of gold brought in by male Non-Resident Indians (NRIs). NRI women, it says, should be allowed to bring home double that quantity.