Demand is expected to go up steadily over the next few months for high-quality gold jewellery as per traders in India. Prices may be rising rapidly but the fact is that gold has lost a major chunk of its sheen for Indian exporters in recent times, particularly those exporting gold jewelry to the United Arab Emirates (UAE). The UAE is the biggest export market for gold as far as Indian traders are concerned and exports of gold jewellery have tumbled by a whopping 80% in the quarter between April and June this year.
Indian Gold Exports to UAE
Exports have reduced to just $321.24 million in comparison to a hefty $1.54 billion witnessed in the same quarter last year according to reports released by GJEPC (Gems and Jewellery Export Promotion Council) from India. Demand has considerably reduced for gold jewellery in the gold markets in Dubai while exporters in India have also been demonstrating reluctance to export finished goods on the basis of credit to UAE buyers. These are factors that have been emphasized upon by Indian trade experts as key reasons for lower gold jewellery exports in the last quarter.
The National Secretary of the India Bullion and Jewellers Association or IBJA, Surendra Mehta, has already stated that Dubai is the predominant global market for jewellery and gold. He also added that the COVID-19 pandemic led to a worldwide lockdown and subsequent restrictions on traveling led to vanishing demand within just a few months. Mehta also added that a high number of global gold and diamond retail players are already filing for bankruptcy in the United States and other countries. He opined that this has spurred exporters of gold jewellery in India to adopt a more cautious approach and withdraw the provision of credit based shipping of goods.
This is because they are unsure about receiving payments after shipment in the current scenario according to Mehta, who also stated that Indian traders have stopped sales of gold on credit basis to domestic retailers too. However, he stated that with travel limitations easing up steadily in the UAE, the sector will be adopting a wait and watch policy over the next few months before exports revive again. The industry is anticipating higher gold jewellery demand over the next few months with the unlocking of several global economies including Dubai.
Gold demand in India for the period between April and June also came down by 70% to stand at 63.7 tonnes, a record low threshold over the last 11 years. In the same period in 2019, demand stood at 213.2 tonnes. The huge drop in demand was attributed to the unusual appreciation in prices for gold over the last few months. 22 carat gold prices have already touched close to $700 sometime earlier which is higher by 30% than the $530-540 threshold seen earlier in 2020. Prices of gold jewellery are considerably higher in India owing to the import duty of 12.5% for gold and 3% GST (goods and services tax). In comparison, Dubai charges just 5% as the taxation rate for gold, making prices of jewellery considerably cheaper and drawing several Indian buyers in the pre-COVID-19 scenario.
Dubai is also one of the biggest global suppliers of gold jewellery, churning out close to 80-90% of jewellery manufactured in the UAE that is sold to other nations at wholesale rates. If you are thinking of starting a company in the UAE, registering or filing for VAT or getting help with auditing/accounting, you can reach out to GCC Filings, an experienced and skilled firm that will cover all your needs with aplomb.