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Despite the coronavirus pandemic and surging gold prices, the gold retailers in the UAE are getting a reprieve thanks to an Indian festival. Forced to move sales online by the outbreak, the retailers are now reporting an increasing demand for gold bars, gold coins and light jewellery.
Driving the demand for gold jewellery and coins is the Indian festival of Akshaya Tritiya, during which it is considered auspicious for Indian households to purchase gold. UAE retailers have already launched promotions to capitalise on this annual tradition. With spot gold crossing the $1,700-an-ounce threshold, investors are also racing to lock in prices before they rise further.
Bank of America, one of the biggest US banks, has a bullish view on the precious metal and expects prices to hit the $3,000-per-ounce mark in the next 18 months, according to its latest report, titled “The Fed Can’t Print Gold”.
Market analysts predict gold prices will reach $2,000 per ounce this year and say that buying gold in electronic or physical form is an attractive option now.
"Gold markets are witnessing very bullish price action with the metal in international spot markets breaking above the March high of $17,04. The price action is supported by strong investor interest. The yellow metal is also supported by central bank purchases of bonds,” said Vijay Valecha, Chief Investment Officer, Century Financial.
Selling gold online
For retailers in the UAE, online sales took centre stage soon after the lockdown kicked in.
“We are aggressively promoting online gold sales ahead of Akshaya Tritiya as we don’t want our customers to miss out on an annual key tradition. It is a key business season for us. Ever since the pandemic outbreak, we have seen strong interest in our gold bar and coin sales,” Shamlal Ahmad, Managing Director – International Operations, Malabar Gold & Diamonds, told Zawya.
The retailer has had online gold and jewellery sale in the UAE for the past five years. Most customers buy 24-carat gold bars online on the retailer’s website, as other products attract a VAT of 5 percent.
“These gold coins and bars are being purchased not just by traditional investors, but also by our average consumer, who has an inherent investment mentality,” Ahmad explained.
Joyalukkas just launched its website for online gold and jewellery sales in the UAE but has been selling online gift vouchers for a long time.
“Most customers do not want to buy big jewellery sets today as they have nowhere to wear it to. Therefore, lightweight products that are ideal for gifting are in demand online. Also, we are seeing strong demand for gold bars and coins as they are ideal for investment. With oil prices falling and currencies being so volatile, gold is still highly liquid,” Sonia Alukkas, Director, Joyalukkas Group, told Zawya.
However, retailers aren’t too convinced that online sales will make up for the loss in volume from physical showroom sales. They claim that UAE consumers prefer to physically purchase gold from a showroom.
“Gold is a high involvement product category. People want to touch and feel it before purchasing it. They love the experience of going to a store and trying out several jewellery sets before buying one. Our volumes are predominantly from offline stores,” said Ahmad. Malabar Gold & Diamonds operates 65 stores across the UAE.
Alukkas added: “We are not sure if the UAE market is ready for online gold sales as yet. Buying gold is a very emotional process where touch and feel, a customised experience, ambience, colour and lighting all play a big part. It’s not an impulse buy, say like buying grocery or furniture. Countries that have a mature market for online jewellery sales are the US, India and Singapore, while the UAE is gradually getting there.”
Meanwhile, Meena Jewellers, which has four showrooms in Dubai, has not launched online sales as yet. “Purchasing jewellery will be the last priority on people’s minds now as it’s not a necessity. Everyone is holding onto their assets owing to the uncertainty. Also, delivering gold, especially gold coins and bars, door to door is not economically viable for jewellers as it’s not a mass product like grocery,” said Vinay Jethwani, Partner, Meena Jewellers.
Delivering gold home
Malabar Gold & Diamonds will deliver any jewellery, gold bars and coins purchased online after the lockdown is lifted in the UAE.
“If the customer is not happy with the purchase made online, they have a window of 15 days to exchange the product. We also provide a discounted shipping service,” informed Ahmad.
Joyalukkas said it would deliver the products purchased online within 10 days, subject to the UAE government’s lockdown restrictions. “We have another line of jewellery, Amira Jewels, targeted at local and expat Arabs, which will be delivered in two to three days of purchase,” Alukkas added.
(Writing by Disha N, editing by Seban Scaria)
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