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UAE gold demand set to rebound on VAT refund 

Dubai - Gold jewellery demand in the UAE fell six tonnes in the third quarter.

Gold jewellery demand in the UAE fell six tonnes in third quarter, down 13 per cent year-on-year, but traders are upbeat of a recovery in the last quarter on the back of an impending VAT refund scheme for tourists.
The latest market update from the World Gold Council said on Thursday the demand slump was also felt across the Middle East region as global demand for the yellow metal rose slightly in the third quarter to 964.3 tonnes, up from 958.1 tonnes in the same period a year ago.
In the UAE, the gold jewellery market continued to feel the impact of the five per cent VAT. However, gold traders are expecting a big fillip when the UAE starts VAT refund to millions of tourists from November 18. The refund system will be initially available at Abu Dhabi, Dubai and Sharjah airports, and by year-end, it will be extended to 12 exit points, including the land borders and ports.
Chandu Siroya, managing director, Siroya Jewellers and vice-chairman Dubai Gold and Jewellery Group, said the VAT refund would surely be a big relief to the tourist jewellery buyers. "Jewellery will once again be cheaper than their home countries and it will be a big incentive for them to buy latest design quality jewellery at the world's best prices. This will be a big boost to the wholesale and retail jewellery trade that has been under a lot of pressure for the past few months."
Siroya said the refund of VAT on jewellery and all other purchases would be a big incentive for the tourists and "also will have a major psychological impact on the resident population as well. We are surely going to see the good old times in the UAE markets."
Shamlal Ahamed, managing director, International Operations, Malabar Gold and Diamonds, said he expects a significant upswing in demand once the VAT refund for tourists come into effect in the second half of this month. "Even with five per cent VAT, the UAE gold jewellery prices continue to be the lowest in the world. With the refund scheme, we expect a major rebound in sales," he said.
In the Middle East jewellery demand remained under pressure in the face of geopolitical stress - down 12 per cent year on year to 37.7 tonnes.
Analysts at WGC said the fast drop in value of the Indian rupee also affected demand from the important Indian expat community. "The direction of jewellery demand in the UAE remains under question, particularly as some retailers registered losses for the first time," WGC analysts said in their quarterly demand trends report.
In Saudi Arabia, jewellery demand rose seven per cent year-on-year to 11.9 tonnes as local consumers were able to benefit fully from the falling gold price as a result of riyal's dollar peg, while rising oil prices boosted their confidence.
Across the globe, price-conscious consumers took advantage of a declining gold price to boost third quarter jewellery demand.
Demand for jewellery increased by six per cent year on year to 535.7 tonnes. "India, China and several South-East Asian markets saw respectable year-on-year increases, while demand in Iran, Turkey and the UAE fell significantly."
After two consecutive quarters of declines, third quarter saw jewellery demand in India grow by 10 per cent to 148.8 tonnes.
Global demand for gold rose slightly in the third quarter compared to the same period a year ago as resurgent buying from central banks and retail consumers balanced huge outflows from exchange traded funds, the WGC report said.
Despite the uptick, it was the third consecutive quarter of demand below 1,000 tonnes. Gold consumption in the first nine months of the year has been the lowest since 2009, according to the WGC.
Exchange traded funds saw outflows of 103.2 tonnes over July-September after inflows of 13.2 tonnes in Q3 last year.
Almost three quarters of the outflow was from funds in the United States, where a strengthening dollar, rising interest rates and soaring stock markets prompted investors to ditch gold, pushing prices in mid-August to their lowest in 19 months.
But low prices, along with weakening currencies and unstable stock markets in countries including top consumer China, helped spur retail buyers, said Alistair Hewitt, the WGC's head of market intelligence.
In India and China, the biggest buyers, demand rose 10 percent, to 148.8 tonnes in India and 174.2 tonnes in China.
Hewitt said the WGC expected overall demand this year around 700-800 tonnes in India and 900-1,000 tonnes in China.
Central banks bought 148.4 tonnes of gold in the third quarter, the most for any quarter since 2015. The WGC expects central banks to purchase 400-500 tonnes this year, Hewitt said.
On the supply side, mined output hit a record high of 875.3 tonnes but less recycling and reduced hedging by miners meant overall supply fell two per cent year-on-year to 1,161.5 tonnes in the third quarter.
- issacjohn@khaleejtimes.com