Dubai: As gold prices continue to reach new highs, Indian tourists visiting the UAE for Diwali are making full use of their rupee purchasing option to buy the asset.
This is under India’s UPI (Unified Payments Interface) scheme, which allows resident Indians travelling abroad to make purchases or pay for services using their domestic bank accounts. Just before summer this year, the UPI-linked services went live in the UAE after the central bank’s approval. Merchants in the UAE soon added those processes to allow shoppers from India to make seamless payments.
Those efforts are starting to pay off big for this year’s ‘Dhanteras’, the Indian festival that’s being marked today (October 29) and followed by Diwali on October 31 and November 1. Both occasions traditionally see high sales of gold and diamond jewellery.
There is a flat 6% difference between gold sold at the retail level in the UAE and India. In addition, other factors come into play, such as the making charges, FX rates, etc.
For jewellery retailers in the UAE, the UPI payment option has come at the perfect moment. “What this means is that shoppers from India planning to buy gold here don’t have to worry about INR-AED exchange rates,” said Abdul Salam K. P., Vice-Chairman of Malabar Gold & Diamonds. “If they have decided to spend a certain amount – say Rs400,000 – on gold buying in India, it’s one smooth process to do so using RuPay or PhonePe platforms.
“Plus, they also get a VAT refund here – billed directly to their bank account in India.”
This means that shoppers from India planning to buy gold here don’t have to worry about INR-AED exchange rates.
Shoppers need all the help
After a relative softening since Wednesday last, gold prices have shot up today to $2,750 an ounce levels and within touching distance of the all-time high – so far – of $2,758. The UAE gold rate for 22K is at Dh307.25 a gram, but that’s going to rise once the first rates are set for today. (The highest in the last 10 days has been Dh308.25 a gram.)
UAE shoppers on the lookout for deals on gold and diamonds are getting subsidized making charges, even dropping to under 2% in some promotions, free gold coins, and ‘guaranteed buybacks’ schemes.
In fact, the guaranteed buyback is becoming a common factor among all the leading and independent jewellery retailers in the UAE. This way, shoppers are assured of trading in their old jewellery for new or cash, but keeping what they lose on making charges in the exchange to a minimum.
“Buyback schemes are turning out to be the most popular draw with shoppers in these times of extreme gold price inflation,” said Joy Alukkas, Chairman and Managing Director at the retail chain which bears his name.
“Based on early trends for Dhanteras, we expect the same number of shoppers, whether UAE residents or Indian visitors. The only difference from last year is that individual purchases may be smaller in gram terms because of the high prices.
Buying gold for Diwali is a tradition, and we expect same levels of demand at our stores in India, except for maybe in Kerala.
Competition from LuLu IPO
The Dhanteras-Diwali buying is one of the high seasons for gold over the years in the UAE. But this year, another factor has come into play in dictating the level of demand from shoppers.
The LuLu Retail IPO is open for subscription, and has already generated significant levels of committed interest from the Indian expat community here. This means that part of the investments many of these residents would have made for gold buying during Diwali has been diverted to pick LuLu Retail shares.
Looking beyond LuLu
The LuLu IPO subscription period ends November 5, and for gold buying, there are plenty more occasions for shoppers to add to their holdings.
“Mid-October to December is recognized as the ‘wedding season’ in India, where gold plays a vital role as both a gift and adornment,” said Arun John, Chief Market Analyst at Century Financial. “Many jewellers have begun offering discounts and reduced making charges, a move that is atypical for this time of year.”
So, if shoppers are willing to overlook the high price of gold, there are promotions and discounts they can make use of.
And for shoppers from India, there is always the RuPay, PhonePe or Paytm option…
