Dubai’s gold market bears brunt of India’s note ban

Dubai’s famous Gold Souq, a prime market for yellow metal, has been witnessing almost a complete absence of visitors from India due to demonetisation, according to a media report.

For the single-store operators in the market, the demonetisation hit has been extremely severe. “What you are seeing here is a complete mirror image of the crash in gold sales within India since November 8, when demonetisation was announced,” said Cyriac Varghese, General Manager of Sky Jewellery.

“Outside of the Gold Souq, shops in areas such as Bur Dubai too have been recording less of Indian visitor buying interest,” Varghese was quoted as saying by the Gulf News.

In a good year, rupee-led transactions in the market would have accounted for close to 15-20 per cent of sales, and more when gold prices take a dip (as it did last week), the report said.

According to retail sources, there has been some compensation in the form of Chinese visitors who have been more active in recent weeks with their gold buying. But this is nowhere near the levels of Indian visitors.

Chinese prefer for the 18-karat as opposed to the 22k, it said.

“A visitor from India would travel to Dubai holding a sizable value in Indian currency, get it exchanged here and then make the conversion to jewellery,” said Abdul Salam K P, board member of the Dubai Gold & Jewellery Group.

“With demonetisation, surplus cash is just not available and same is the case with what someone could do with their unaccounted rupees,” he said.

Local currency exchange houses are not helping anyone holding the older currencies either. “At present we are not accepting or exchanging any of the discontinued currency notes, taking into consideration the guidelines that need to be adhered to on account of demonetisation,” said Antony Jos, Director at Joy Alukkas Group.

In India, the Punjab’s famous hosiery industry has become the latest victim of demonetisation as the cash crunch has led to a massive fall in demand of woollen apparels, compelling the manufacturers to resort to heavy discounts in a bid to clear the built-up inventory.

Woollen garment makers are offering lucrative discounts starting from 20 per cent to 50 per cent in the month of December even on fresh products in the wake of lower offtake, according to industry representatives.

They rued that garment makers were “forced” to offer heavy discounts in the month of December itself as against in January or February in order to meet their fixed expenses including payment of workers’ wages.

“Woollen garment manufacturers have started offering discounts ranging from 20 to as high as 50 per cent in December month even on fresh makings to clear their stocks which have built up because of low demand, caused by demonetisation,” said Vinod Thapar, Chairman of Ludhiana based Knitwear Club. Notably, discounts are generally offered in the month of January or February. He alleged that hopes of hosiery industry to generate good sales this season were dashed after demonetisation came into effect.

“Industrialists, be it small or big, were panicked thinking that their inventory might get stuck and might not be able to clear it during this season and could cause them heavy losses,” said Thapar adding that the demand for woollen items within the state and from neighbouring states like Haryana, Jammu and Kashmir, Himachal Pradesh etc shrunk after scrapping of old notes.

Ludhiana-based prominent industrialist and maker of Shingora brand of shawls, Mridula Jain said, “The industry has been hit hard because of low demand of products.” 

Jain said Shingora Shawls is also offering 20 per cent discount across the board. “We are not against demonetisation. We want the sufficient amount of liquidity of cash be made available by banks,” she said.