Time to buy precious commodities in Dubai before they get pricier
Central banks, funds will continue buying yellow metal as geopolitical tensions would mean higher prices in short, medium term
It's the right time to buy precious commodities, according to the Dubai Gold and Jewellery Group (DGJG), the umbrella group representing the local industry, with industry executives believing that there is more potential of the price going up in the near to medium term.
They noted that central banks and funds will continue to buy the yellow metal as geopolitical tensions will keep the commodity's price higher.
Also read: Gold rates in UAE today
Tawhid Abdullah, chairman of the DGJG, predicted that the price of gold will range from $1,450-$1,700 in the short to medium term.
"People should be looking at gold more seriously today and save more in the safe-haven metal now than before because the commodity's potential has been proven over the last 10 years. Now, not only central banks and governments are buying gold, but a lot of funds are also allocating a good percentage - 3 to 5 per cent. In 2019, the yield in gold was one of the highest - more than 18 per cent," he told Khaleej Times in an interview.
Gold's price last closed at $1,557.30 on Friday, up 0.90 per cent or $18.40. It has risen by 5.45 per cent in the last 30 days and 9.3 per cent in the last six months.
According to the World Gold Council (WGC), gold was fourth-highest in terms of annual returns after oil, S&P 500 and EAFE stocks last year. In 2019, gold had its best performance since 2010, rising by 18.4 per cent in US dollar terms. It also outperformed major global bond and emerging market stock benchmarks over that period.
"Net gold purchases by central banks will likely remain robust even if they are lower than the record highs seen in recent quarters," the WGC said.
Chandu Siroya, owner of Siroya Jewellers, said gold is one of the first responders when geopolitical tensions arise.
"When there is turbulence, people rush to gold. Many central banks have also started buying gold so the scope of the price going up is more than down. If someone wants to buy gold, this is high time; we should not postpone it because there will be a small fluctuation in the price, but overall it is expected to go up in the short to medium term," Siroya said during the interview.
Prices in Dubai cheapest
Siroya pointed out that gold and jewellery prices are cheapest in Dubai because production and transportation costs are negligible. "Jewellers believe in high turnover and low volume. It is because wholesale, distribution, manufacturing and redistribution is done locally and that is a major advantage."
He said diamond jewellery is cheaper by 15 per cent while gold jewellery costs 5 to 10 per cent less in Dubai than other countries.
According to Siroya, the 15 per cent duty in India on the import of gold jewellery is the straight discount that Indian tourists or non-resident Indians benefit from when they purchase jewellery in Dubai.
Abdullah said prices of gold and jewellery are updated three times a day and sometimes even more in order to reflect true global prices.
"In Dubai, prices are the cheapest. In other parts of the world, gold retailers keep holding on to higher prices and they don't reflect discounts to consumers when prices go down. But Dubai is the most transparent market for gold jewellery. We change price three times a day and if there is a sudden major movement, we change it again for B2C clients," he added.
Abdullah expects 2020 to be one of the best years for the gold and jewellery industry. Thanks to the Dubai Shopping Festival, the year began on a strong note and the gold jewellery veteran expects that foreigners arriving for Expo 2020 and festivals during the six-month long period of the Expo will make it one of the best years for the local sector.
"2020 is expected to be a record year, considering good numbers in the beginning of the years as well as the impact of Expo 2020 as millions of people will flock to the UAE. We are targeting well over 10 per cent growth as compared to last year. Third and fourth quarters of this year will be very strong as there will be a lot of festivals such as Diwali, Eid and Christmas. During the six-month of the Expo, there will Mothers Day and Valentine festivals as well," he added.
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