-- Posted Monday, 4 November 2013 | | Disqus
Gold retailers in Dubai are expecting to see their sales surge by 50 per cent this week as the five-day Diwali festival of lights continues this week. Gulf News reports that retailers are posting 25 to 100 per cent increases in business so far. Thank a 25 per cent fall in gold prices this year and a 10-15 per cent tax on gold by the Indian Government.
Savvy Indian investors have always responded to falls in the gold price by buying more gold, not selling it. Diwali is one of the most important religious festivals in the Indian calender with the giving of gold at its heart.
City of Gold
Gold jewellery is always a popular buy in Dubai because only a small margin is paid over the cost of the precious metal. It’s not like the US or UK where profit margins and design can put retail prices at double or triple the price of gold.
Also this year nobody needs to remind Indian buyers of gold of how this precious metal works as a defense against devaluation and inflation. The Indian rupee has plummeted more than the price of gold which is still trading at record prices in rupees.
Indeed, that has prompted the Indian Government to raise taxes on gold to 10-15 per cent to help control demand and ease its huge balance of payments problem by lowering gold imports. That is good news in Dubai where gold is sold tax free.
Dubai first became the City of Gold decades ago when it was a centre for smuggling gold into India. It was perfectly legal to buy the yellow metal in Dubai. It was the sea journey into India where the illicit trade began.
Tax free Dubai
High gold taxes again today are encouraging a similar arbitrage in gold. That’s great news for the gold traders in Dubai who always do well in Diwali but whose cash tills will be ringing still louder this year.
How long until this sort of upsurge in physical demand for gold pushes up the price? The Fed has been manipulating the gold futures market to support the dollar for a couple of years now. This cannot be done indefinitely so for the patient longer term investor it is only a question or when and not if gold prices finally go up substantially.
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-- Posted Monday, 4 November 2013 | Digg This Article
| Source: GoldSeek.com
