|Business Home > Nation|
Lower gold prices a boon
Muzaffar Rizvi (firstname.lastname@example.org) / 28 July 2013
Jewellery sales are gaining momentum while gold coins and bars are in high demand in the wake of the plunge in the prices of the yellow metal this year, industry players say.
Major retailers and gold jewellers have redesigned their business strategies and are now comfortable with present gold prices, which resulted in strong double-digit sales during the first half of 2013. However, some shop owners and customers in Dubai and Sharjah have complained about a shortage of “Swiss brand” gold bars and coins in the market.
In a survey conducted by Khaleej Times in the Dubai and Sharjah gold markets, customers also alleged that jewellers and retailers are charging higher premiums — mainly on small bars and coins — as well as on lightweight jewellery items to cover up their losses they incurred due to the “unexpected” decline in gold prices this year.
Gold traders and jewellers are asking for an up-to-Dh200 premium on 50g gold bars while the rate on jewellery below two or three grammes are up at Dh350. Gold traders and jewellers say the supply of a certain brand’s bars and coins is tight and, therefore, they are unable to cater to customers’ demand.
“I’m finding it hard to find Suisse brand’s 50g bar and 10g coins on market price as the shop owners either don’t have or they are asking for higher premium,” Ifra Warsi, a Sharjah resident, said.
Muhammed Usman, who was exploring the Dubai Gold Souq for a 10-tola bar, echoed the similar complain and alleged that some gold traders are reluctant to sell their “stock” on present prices and have taken off the bars from shelves amid hopes of a recovery in the market later this year.
The consumer protection section of Dubai Department of Economic Development, or DED, confirmed that it had received complaints about shortage of gold bars and coins in the market and said it is taking necessary action to address the issue.
“The number of gold bars complaints received is relatively low in comparison with other complaints,” Abdulaziz bin Hathboor, director of consumer protection at the Dubai DED, told Khaleej Times.
He said the department’s inspectors are in the field on a daily basis to monitor the market and curb unfair business practices.
“We encourage consumers to contact the retailer with their complaint and seek a remedy before approaching the DED.”
To a question regarding the department’s action on complaints, he said the DED resolution process starts when the consumer and retailer fail to reach a solution.
“Upon receiving a consumer complaint, the department will verify and establish the validity of complaint as directed in the Federal Law No 24  on Consumer Protection. If the complaint is valid, the DED will register the complaint internally and contact the retailer to seek resolution,” he said. “We work with traders and consumers to protect their respective rights and ensure fair practices. Wherever required, we also work together with other authorities concerned to ensure that the law of the land is upheld,” Bin Hathboor said, adding that in most instances the complaint is resolved within four working days.
After facing an initial setback on the unexpected price plunge, retailers and jewellers are now cashing in on low gold prices by posting higher sales in the first half of 2013. Major industry players in gold souqs and malls are now witnessing more customers and realising more sales as prices dropped drastically in 2013.
“First-half gold sales were remarkable because gold prices went lower and customer started buying. Our gold sales surged around 30 per cent while diamond sales rose 10 per cent in January-June period this year,” Firoz Merchant, chairman of Pure Gold Jewellers, told this scribe.
He said the second half will be challenging for gold as it depends on the customer’s mindset, but at the same time, expectations with regards to diamond sales are better. However, he saw no extraordinary demand for gold bars and coins in the market.
“We see a trend towards consumers purchasing more diamond jewellery and this has boosted our diamond sales. Diamond prices have also gone up since maximum rough diamond buyers are based in India, which has seen a dramatic devaluation of its currency hitting approximately the 61-mark against the greenback.”
To a question about the correlation between lower gold prices and higher sales and their impact on profits, he said lower prices will not dent the group’s earnings due to its fixed profit margin. “Our business is volume-based; as volume increases, we are able to ensure profit.”
Gold futures retreated more than 0.6 per cent in the past three days and rose approximately three per cent for the week to finish at $1,331 an ounce from $1,295.75 a week earlier. Year-to-date, gold futures have dropped 20.71 per cent although the prices have rebounded 12.67 per cent from the recent trough of $1,179.40 on June 27.
Goldman Sachs expects gold prices will decline “given our US economists’ forecast for improving economic activity and a less accommodative monetary policy stance”. Their 2014 year-end forecast is $1,050/toz while 12-month price forecast stands firm at $1,175/toz.
“Gold prices have hit a two-year low in 2013 and the short-term outlook for gold prices is that it will go lower. At the moment, consumers are confused and nervous about investing in gold and this has affected the sales,” Merchant said, adding that gold prices have been tumbling in reaction to the Fed and customers are on the fence.
To a question, he said Pure Gold Jewellers did not incur loss due to a “surprise fall” in gold prices. “Alhamdulillah, we have not incurred any loss on gold stocks as we are trade oriented. Our stock levels are not based on speculation. We are blessed to have good business.”
Oofrish Contractor, marketing manager at Liali Jewellery, said sales of gold jewellery is very good at present as consumers, who need jewellery for their special occasions, are able to take advantage of lower prices.
“Today it has become a lot easier to buy gifts in gold for your near and dear ones than at any other time,” he said, adding that some customers are purchasing gold only for the purpose of investment and they prefer to invest in gold bars.
|comments powered by Disqus|