Arabian Business - Dubai’s discount gold attracts Indian investors for Diwali amid global price slump

Gold prices have significantly dropped to a new two-and-a-half-year low on Monday, offering buyers the advantage to purchase the yellow metal at a discount rate, despite inflation.

The cost of 24-karat gold was valued at AED198.25 per gram, whereas 22-karat gold fell to AED186.25 per gram.

21-karat gold was valued at AED177.75, with 18-karat gold hitting AED152.25.

“Gold prices slumped past $1,640 an ounce on Monday morning, reaching lows unseen since April 2020, driven down by the strengthening dollar and surging US Treasury yields, reflecting expectations for tighter monetary policy and slow growth worldwide,” Century Financial’s chief investment officer, Vijay Valecha, told Arabian Business.

Valecha added this presents “a short window of opportunity” for those looking to buy gold, ahead of market stabilisation causing prices to shoot up once again.

“Given the impending expectation of global economic slowdown, the position of Gold as a haven asset is likely to further solidify in the times to come,” Valecha said.

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As far as inflation is concerned, gold has outshined equities and bonds as the best performing asset of the year so far.

This has caused many in the UAE to opt for buying the metal, as it is more of a “safe investment,” Dubai-based Indian expatriate Anish Kuruvilla told Arabian Business.

“Gold is a commodity which is high in value. It acts as a safety net especially during an inflationary macroeconomic environment. Not only does it have resale value, it also does not require a lot of maintenance, unlike other investments. It is easier to obtain a loan against gold, and it also does not diminish over time,” the technical support engineer said, adding if physical gold seems like a hassle to buy, investors can always gold electronically.

Electronic gold, or e-gold, helps bank users to invest in the yellow metal virtually. In the UAE, the service is offered by banks such as Emirates NBD, Mashreq and Rakbank among others.

There are some benefits to the process over purchasing gold physically, including the option to buy in small units through a systematic investment plan (SIP), rather than bulk buying.

“The only drawback is that, you could be subject to hacking issues, investor charges and quality assurance,” Kuruvilla added.

Where to buy gold?

The UAE is the second largest exporter of gold to India, and is the largest export market for Indian gold jewellery. Additionally, India raised its basic import duty on gold to 12.5 percent from 7.5 percent in July, causing many non-resident Indians (NRIs) across the world to turn to the UAE to purchase gold.

However, demand for the yellow metal in UAE significantly increases during Indian festivals, as over three million of the country’s population are Indian expats.

“Even though gold is likely to weaken in the immediate term due to rising global yields, it could recover by the third week of October, around the festival season of Diwali. Demand for gold generally rises during the festival season since it is considered auspicious to buy. Indian tourists and NRIs usually prefer to buy gold and jewellery from Dubai as it proves to be 12 to 15 percent cheaper than India, where shoppers have to pay high tax and custom duty,” Valecha said.

This rang true for Varughese John, a former NRI who lived in Dubai for over three decades, before retiring back to India.

“Purchasing gold in UAE is comparatively cheaper than buying it from India. Firstly, the making charges are less, and we get good deals during festival seasons,” he said.

John continues to visit the UAE to purchase gold to this day.

All that glitters is not gold

Another reason to buy gold in the UAE is because it is “pure,” Kuruvilla said.

“Sometimes, when you buy gold in India and take it to the jewellers here in Dubai, you find out that the gold is lesser in terms of karats. For example, 22 karats in India, could be 21 karats in Dubai,” he said.