UAE, Singapore & Sri Lanka See Boost In International Gold Buyers

Dubai is seldom covered in gold bullion news articles yet that shouldn’t imply that the city is not involved in the bullion space. “Gold And Diamond Park” on Sheik Zayed Road for example; an air conditioned mall consisting of over 60 jewellery stores and perhaps somewhat equivalent to London’s Hatton Garden district which we featured earlier this month, holds a 4.5 star rating on tripadvisor.com.au

It is currently being reported by a number of outlets that Dubai has seen increased gold sales of 10% from Indian buyers this month with outlets in Singapore and more broadly through Sri Lanka noticing a similar trend to a lesser extent.

India’s tax reform and more specifically the introduction of the GST on the 1^st of this month has resulted in a 13% Indian gold premium relative to what can be currently purchased in Dubai. This has made it economical for larger Indian buyers to travel abroad in order to make their purchases.

On the 11^th of this month when discussing the fact that Indians had pulled forward gold purchases to subvert the GST introduction, we wrote that “it remains to be seen whether the surge in Indian gold consumption currently is a replacement for the demand typically seen in Q4 or whether that cyclical demand will still be observable this year”. Obviously we will still need to wait for the complete 2017 picture but early indicators suggest that demand is being geographically dispersed  rather than wavering.

Rajiv Popley, director of Popley & Sons recently said that "shopping for gold in Dubai, especially with a 13 per cent difference, is more lucrative and this will divert some business from India to Dubai".

Senior Operations Executive at BullionVault, Steffen Grosshauser, interestingly notes that Dubai’s boost “may prove short-lived as the Arab city-state moves to impose its own sales tax later this year”, referring to the 5% VAT scheduled for introduction within the UAE next January.

In a publication from earlier this month, The Tribune of India has reported that the post-GST era in India has seen an increase in what they call the “grey market”; referring to an observed increase in purchases made from “small-time goldsmiths who do not provide proper bills in return for waiving GST”. This is something that Steffen Grosshauser concludes is supportive of increased gold smuggling into India.

One thing is becoming certain. Demand for gold seems at least for now unabated in the face of government attempts to curtail its appeal. Whether it involves purchasing metal in more amenable political environments, utilising the grey market or some other means that we have yet to see play out, we are currently observing evidence of behaviour that speaks to a genuine desire to obtain a commodity of inherent value. 

Gold.