Its price may be soaring, but the yellow metal has lost almost all its sheen of late for Indian exporters of gold jewellery to the UAE – India’s largest export market.
The April-June 2020 quarter has seen India’s gold jewellery exports crashing by about 80 percent to $321.24 million from $1.54 billion during the same quarter a year ago, latest data available with India’s Gems and Jewellery Export Promotion Council (GJEPC) revealed.
A massive drop in demand in the Dubai gold market and Indian exporters’ reluctance to export goods on credit basis to buyers in the UAE is cited by trade experts in India as the major reasons for the fall in exports.
“Dubai is the market for the world for gold and jewellery. The Corona pandemic-induced lockdowns and travel restrictions have led to demand just vanishing in the recent months,” Surendra Mehta, National Secretary of India Bullion and Jewellers Association (IBJA), told Arabian Business.
UAE accounts for over 80 percent of India’s total gold jewellery exports.
Mehta said the increasing number of leading international diamond and gold retail players filing for bankruptcies in the US and some other countries have prompted Indian jewellery exporters to be cautious and withdraw the facility of shipping goods on credit basis.
“We cannot be sure of payments post-shipment in the current circumstances,” he said.
Mehta said traders in India have also stopped selling gold to domestic retailers on credit basis.
Uptick expected
Trading circles in India said with UAE slowly easing travel restrictions of late, demand for gold jewellery is expected to pick up steadily in the coming months.
“We will be in the wait and watch mode for the next few months before exports can pick up to UAE,” Mehta said.
India's gold demand for the April-June quarter of 2020 also plunged 70 percent to 63.7 tonnes – an 11-year low - from 213.2 tonnes in the same period last year.
Traders said the massive decline in demand was due to the unusual spurt in the prices of the yellow metal in the recent months.
Prices of 22 carat gold reached almost $700 on Tuesday, about 30 percent higher than the $530-$540 level early this year.
Gold jewellery prices in India are higher because of the 12.5 percent import duty on gold and a 3 percent goods and services tax (GST), while the tax rate in Dubai is only 5 percent.
This makes jewellery prices cheaper in Dubai, attracting many Indian buyers before the Covid-19 pandemic broke out.
Dubai is one of the major suppliers of gold jewellery in the global market, with approximately 80 to 90 percent of jewellery produced in the emirate sold at the wholesale level to other countries.