Investing in one of the world’s most precious metals can be a daunting and risky business. Time Out gets advice from a local expert, regardless of whether you’re after bars, bullions or kilos.
To outsiders, Dubai’s eager approach to wealth and its fascination with glitz is one of the city’s most intriguing traits. And while there is more to the emirate than supercars and cheap diamonds, the fact remains that, as one of the world’s great gold trading hubs, our city is the place to adorn yourself with riches.
In July 2013, gold posted its worst quarterly drop in 113 years. With no tax on the precious metal, Dubai is an ideal place to buy it, but does that mean it’s a worthwhile investment? Not necessarily, according to Keren Bobker, senior financial consultant at Holborn Assets.
‘Unless someone has a crystal ball it’s impossible to predict if gold is a good investment,’ she says. ‘The price can be volatile and there is no guarantee that you will make any money.’ Unlike many investments, including shares and property, you can’t take an income from it adds Keren. ‘I’m more concerned that people build up their savings in a diversified portfolio for their long-term benefit, than speculate on gold. It should be kept as no more than five percent of your total investment assets,’ she adds.
If you do decide to invest in gold, don’t be fooled into stocking up on gold bars from one of Dubai’s gold dispensers (you’ll find them in Atlantis, The Palm and The Dubai Mall). ‘It seems very gimmicky,’ says Keren. ‘A serious investor is not going to buy from a machine, so I imagine it’s more of a tourist souvenir, especially when you consider where most of the machines are.’ Instead, Keren suggests you head straight for the jewellery shops. ‘The most common way is probably by buying jewellery. This is largely sold by weight in the UAE [not the case elsewhere], and the workmanship can increase the price,’ she says. The more intricate the design, the more you can expect to pay. When you go, make sure the store is registered and that you’re paying the current day prices, as set by the Dubai Gold & Jewellery Group, www.dubaicityofgold.com or on the Emirates NBD website, www.emiratesnbd.com.
Gold bullions are sold at the gold souks and certain banks, including Emirates Gold, Al Abayad Jewellers in Sharjah and Credit Suisse, as well as online dealers. ‘You can start with a coin (some special UAE ones exist) costing less than Dhs1,000, a tiny bar of just an ounce, or move all the way up to massive bars weighing several kilos,’ she says. ‘Bullions should be kept in a bank vault, not in your house.’
So when is the best time to buy gold? ‘If only I could predict that,’ says Keren. ‘The best time is when prices are low, so you must keep an eye on the market,’ she says. But investors should also be aware of indicators which contribute to the fluctuating price of gold, including sentiment, governments buying to sell gold reserves and when equity prices are volatile. As for selling, Keren says holidays are often a good time to strike. ‘You may see some small surges at times of holidays when gold is traditionally bought in some countries,’ she says. ‘India is the world’s biggest gold importer and a lot is bought at Diwali and Akshaya Tritiya, as well as during Eid in the Muslim world.’
India may be the world’s biggest importer, but there is often little understanding as to why Dubai is one of the best places to buy gold. ‘It’s in part due to historical reasons and due to the sheer volume of trade here. Both Arabs and Indians have historically been keen on gold as an alternative to putting money in the bank,’ she says. ‘In many cultures it has been tradition for a woman to wear the family wealth, particularly before the advent of safe banking. Some traditions die hard.’
For those eyeing gold as an investment, Keren reiterates her view that it’s imperative to proceed with caution. ‘When being bought for investment it should be considered an assets class like any other and the key to a balanced investment portfolio is diversification. Never put all your money into one asset.
That’s incredibly risky when you have no control over market prices,’ she says. But as long as you’re in Dubai, there’s no harm in adding the odd piece to your jewellery collection.
Which kind is for you?
The most traditional shade, yellow gold usually contains copper and zinc components. The copper content determines how yellow the gold is.
Not to be confused with silver or platinum, white gold is often plated with rhodium (a hard silvery-white chemical element) and contains one other white metal, usually nickel, palladium or manganese. It’s known for its sturdiness and is popular in rings and necklaces.
Popular with fans on fashion, rose or pink gold is made up of gold and copper alloys. The rosier the gold, the higher the copper content. A common ratio in rose gold is 75 percent gold and 25 percent copper.
Know your carats
The carat refers to purity of the gold and units of gold alloy present in the metal. Characteristically, as the purist form available with all parts gold, 24-carat gold is more fine and yellow in colour and most widely available in the souks. Whereas 18-carat gold is 75 percent gold alloy and 25 percent copper, silver or zinc. It’s generally much sturdier.