UAE gold price 'still' lower than in India despite April events
'Yes, there was a phase in April when UAE-India gold price gap was 4% - but that happened because of some issues in the Indian market temporarily,' said Shamlal Ahmed, Managing Director of Malabar Gold & Diamonds. 'It had nothing to do with the Indian rupee firming up in any way and reducing the price difference.
'After about those two weeks in April, the price between UAE and India gold has gone back to 6%.'
April's events had set off a lot of chatter among Indian visitors to the UAE on whether there is any price advantages to buying here rather than back in their home country.
A 'rare' occurence
For instance on April 22, the Indian Board Rate for a gram of 22K gold was Rs9,290. At that day's exchange rate for AED-INR of 23.05 rupees for one dirham, the Indian gold price would be equivalent to Dh403.
That same day, the Dubai Gold Rate was Dh388.75 for a brief period.
It meant that the price difference was just 4% compared to the usual 6%.
It was in July 2024 that India slashed duty on gold from 15% to 6%, primarily done with an eye to drastically reduce gold smuggling into the country.
But for UAE and GCC gold jewelers, it meant the sizable 15% price difference of the past. But that did not in any way lead to a drop off in gold buying from Indian visitors/tourists to the UAE.
'There would be guided tours from India who would come directly to the Dubai Gold Souq,' said Ahmed. 'Even though the price difference was cut from 15% to 6%, what changed was that Indian tourists ended up buying more here.'
But gold trade sources say that anything less than 5% price difference could alter buying habits among Indian visitors. Which is why what happened last month when the price difference slipped to 4% came as a bit of a jolt.
What happened in April?
The main cause for the sudden change in India-UAE gold price differential was because of the cut in the premiums on gold deliveries charged to jewelery retailers in India. 'Where jewelers were used to paying premiums, they suddenly were seeing big cuts,' said Ahmed. 'It was mainly because many jewellery retailers who were not hedging their gold buys were hit by margin calls. It meant there was a lot of gold availability in the Indian market at the same time.
'That explains the price difference between UAE and India narrowing rather than anything fundamental. This was a short-term change, nothing more.'
Indian tourists to the UAE remain one of the biggest buyer categories for gold in this market. Which is why price changes in India are watched with intense interest here.
"In some months, Indian tourist buying makes up 30%-40% of our sales," said a jeweller. "The biggest reason continues to be the price difference - there was no issue when India slashed duty from 15% to 6%.
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