Why UAE gold shoppers are turning into sellers?

Dubai: The sudden and sharp rise in prices since June 20 has brought gold buying in the UAE to a near halt – but that doesn’t mean shoppers are not doing anything.

Instead of buying, many are using the high prices to sell their gold holdings to make a quick profit, of as much as Dh30- to Dh35 a gram. Such profit taking on gold by consumers has been rated as “unprecedented” by market sources, at least in recent times.

Gold prices shot up from Dh153 a gram on June 19 to Dh157.75 on the 20th, Dh159.25 on June 22 and 23, and then all the way up to Dh163.50 on the 25th.

“It was the trigger for shoppers to make a quick profit,” said Abdulsalam K.P., Executive Director at Malabar Gold and Diamonds. “Most of the coins and bars they were selling were bought over the last two to three years, when prices were in the Dh130-Dh135 a gram range.

“So when gold has touched Dh160 and more, sellers were pocketing a tidy sum.” (There is no VAT on individuals selling gold, provided the overall transaction comes under Dh350,000. Plus, there is no VAT on gold coins.)

In most instances, they were selling coins and bars for cash rather than picking up another piece of jewellery. And where sellers did not have coins or bars, they made do with trading in jewellery.

Retailers in the UAE now have schemes where sellers can trade in their old jewellery at nil cost, provided they were bought originally from stores within the UAE and other Gulf markets. Earlier, such trade-ins would have cost the seller Dh3-Dh4 a gram.

There is an inherent irony in the situation that UAE’s gold shoppers and retailers find themselves in now. Typically, the weeks leading up to the annual school and summer breaks typically sees a rise in gold demand, especially from South Asian expats. And most retailers do run promotions targetted at such purchases.

But this summer, it’s the retailers who are doing the purchases from the shoppers, be it coins, bars or jewellery.