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After a gap of nearly 11 months, tourists to the UAE are making a return to the gold and jewellery stores in sizeable numbers, and making full use of the VAT refund schemes in the process. For a sales starved jewellery industry, the pickup in tourist buying has come as a significant boost to their turnover prospects during the crucial holiday buying season and during DSF 2019, which opens Wednesday.
VAT refunds for tourist shoppers came into effect November 18. “All through this month, traffic at jewellery stores in the UAE have improved significantly compared with the previous 11 months, and this had everything to do with visitors to the UAE getting back into the shops,” said Joy Alukkas, Chairman of the jewellery store network that bears his name. “We expect the real boost in sales to happen post-Christmas, when more Indian tourists are likely to arrive in the UAE for the holiday period.
“For 2019, we forecast tourist-led sales to be 8-10 per cent higher than this year. Tourist shoppers clearly were waiting for a clarification on the VAT refund — these shoppers were not buying their jewellery needs in other markets, but just waiting for the right time to make a return.”
The VAT refunds can be claimed at the airports, and these can be either through cash (up to a certain limit) or as paybacks to the shopper’s credit card or bank account.
According to Abdulsalam K.P., Executive Director at Malabar Gold & Diamonds, the most obvious signs of increased tourist spending on jewellery is happening at the Gold Souq stores in Dubai. For years, this has been the focal point of anything and everything related to the business of gold. During the better part of this year, Gold Souq outlets were suffering from a sharp drop in tourist buying and from domestic shoppers staying away as well.
Will it take longer for domestic shoppers to make a return? Gold trade sources remain unsure whether this is likely to happen in the near future. Consumer confidence still remains low key — the latest Nielsen data on UAE’s shopper sentiments reveals a drop during the third quarter. It is unlikely that matters would have improved significantly in the current quarter.
It may not help the retailers’ cause — and of local shoppers — that gold prices have been heading higher in recent days — the asset is up 2 per cent this month and in line for the biggest one-month gain since August of 2017. On Monday, bullion was trading at $1,262 (Dh4,635) an ounce.
These days, gold is again basking in the glow of being a safe-haven asset. Exchange-traded funds and central banks are picking up the metal, and when they do so, they turn costlier for shoppers.
“There are so many factors why gold prices could be heading higher in the coming days — dollar weakness, the US government shutdown, oil price slide, doubts about what the US Federal Reserve will do next,” said Cyriac Varghese, General Manager at Sky Jewellery. “You can take a pick of reasons for gold’s rise.
“One has to wait to see at what price level resistance builds up against further rises — for now, $1,285 an ounce looks a possibility and from there to $1,300 won’t require much of a push. But anything higher than that could attract resistance ... at least that’s what we believe.”
Will local shoppers continue to baulk at paying the higher price plus VAT? “The DSF promotions should spur some buying activity,” said Salam. “Yes, there’s a sameness about the promotions — but DSF gold shoppers have gotten used to trying and winning gold bars.
“What we have seen is that there could be an initial hesitation among buyers over price rises, but then they get back into buying before prices shoot up too high. We are in that kind of a situation now.”
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