Gold prices have hit record highs and crossed the $1,000 (Dh3,671) per ounce mark, driving away customers in Dubai and fuelling a booming market for less expensive imitation jewellery.
The international gold market has suffered a setback in sales due to prohibitively high prices and sales in India’s massive gold trade have slumped more than 30 per cent in the past two months.
High prices, however, have created a growing parallel market for jewellery traders who specialise in fake gold or mixed metal ornaments. One group that has done particularly well in Dubai is retailers of one-gram gold jewellery, who produce heavy ornaments made with a thin layer of real gold alloyed on cheaper base metals such as copper or silver.
Parakkat Jewellery, an established one-gram gold dealer that has been in Dubai for the past four years, said business has grown by more than 50 per cent per year.
“Our sales have recorded more than 35 per cent growth in the past six months. We expect demand for one-gram gold jewellery to remain high due to high gold prices and customers’ psychological addiction to gold,” said Binu Parakkat, general manager of Parakkat Jewellery, a business he said his father started when gold prices began soaring out of reach of average customers.
“We started our Middle East operations with just one branch in Karama. Now we have several branches in Dubai, Sharjah and Abu Dhabi, in addition to Oman and Bahrain.
“This month we will open an outlet in Kuwait. Within a short period we will have branches all over the Gulf region,” said Parakkat.
According to the Gem and Jewellery Magazine of India, the Asian country has the largest market for gold in the world – selling 800 tonnes per year with 20 per cent of that to Keralites.
Gold analyst Madhu Sudan Dega told the magazine the volume of one-gram gold business in India has grown to reach 40 tonnes a year.
Parakkat said a number of economic factors have driven customers to give up buying the real thing. “Due to high gold prices, soaring living costs and the unfavourable exchange rate, even the upper middle class non-resident Indian families do not buy real gold ornaments now. They buy one-gram gold ornaments in different patterns and designs. Most of our customers are upper middle class Indians who cannot spend a huge amount on real gold, but do not want to give up showing off their wealth,” he said.
“By paying the equivalent of goldsmith charges of gold jewellery, they get an ornament that looks just like the real thing. If it is used sparingly, the gold covering and colour will last a long time.”
Indian retailers have said the trend is evident in India as well.
Salim Raj, an Indian gold salesman, said Kerala is witnessing a boom in one-gram gold business and even affluent non-resident Indian customers are buying cheaper gold imitations in bulk to give to their peers and to use during special occasions.
“There are exclusive shops selling one-gram gold jewellery in India. The business has been flourishing and high gold prices are boosting demand. Many of our customers buy bulk and come back frequently,” he said.