Wednesday, September 20, 2017
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DMCC 6th Dubai Precious Metals Conference #BusinessBreakfast

The conference on 9 & 10 April was well attended, with 400 delegates registered. The most eagerly anticipated topic of two-day event was introduction of VAT in the GCC, and whether jewellery and gold branding would add value when sales are under threat from higher prices post-VAT.

Responsible sourcing of precious metals, and the new shariah-compliance of gold were also warmly debated.

Hot points:

VAT in the UAE:

The audience was asked via an interactive electronic voting pad a number of questions about the gold market after the introduction of VAT at the start of 2017 in the UAE. Some of the responses were as follows:

1. Do we expect the gold and jewellery industry to move to other jurisdictions, such as Turkey, Singapore and Hong Kong, after the introduction of VAT in the UAE next year?

Yes:     69%
No:       26%
Unsure:  6%

2. Is the UAE gold and jewellery industry ready to implement VAT in 2018?

Yes:        9%
No:       81%
Unsure:  9%

3. How will the introduction of VAT on gold bullion and jewellery in the UAE from 2018 impact trade volumes in the UAE?

Increase:     3%
Decrease: 92%
Not sure:     6%

Branding:

The majority of local gold & jewellery sold in Dubai is not branded. The conference debated the idea that branded jewellery could fetch a premium, and that the premium would aid manufacturers after the introduction of VAT. The principle being that customers will pay more for a branded product.

  • The Royal Mint – itself an 1,100 year-old brand stressed the importance not just of branding, but of looking after every aspect of that brand….without slip-ups! Brands that take years and investment to create can be destroyed overnight.
  • Branding is an emotional trigger which could work in jeweller’s favour, as gold & jewellery is an emotive purchase.
  • A good brand is a hallmark, not just of quality and workmanship, but also of responsible product sourcing, particularly where gemstones are concerned.
  • Branding is more than just advertising, and requires long-term shareholder buy-in.

Shariah-compliant gold:

Gold has long been a shariah-compliant grey area, as Islam generally forbids wearing of gold or silk after the words of the prophet.

From the World Gold Council: Gold is one of the six ribawi items alongside silver, wheat, dates, barley and salt. Ribawi items are defined as staple, everyday commodities so stringent transaction rules apply to prevent injustice or inequality between transacting parties. There is also a longstanding debate about whether gold is a currency or a commodity, making the design of consistent Shari’ah rules for modern gold products more difficult. The complexity of Islamic attitudes toward gold products has led to a scattered and fragmented set of rulings. This lack of uniformity is a major impediment to the development of gold financial products in Islamic finance”.

But now a ‘new’ Islamic gold standard has been created by the World Gold Council, along with AAOIFE, the Accounting & Auditing Organisations for Islamic Financial Institutions, and Malaysia’s Amanie Advisors.

Attending the conference was the CEO of Amanie Advisors, Maya Marissa Malek.

She and a panel debated the new Islamic Gold Standard, and the potential on the market after gold ownership was given the Islamic halal green light.

Key points on the Islamic ruling:

Shariah compliant gold ownership could boost gold consumption by 150-200 tonnes.

Shariah-compliant gold trading declared ‘halal’ or acceptable, but under T+0 or immediate settlement. In other words, as it’s forbidden under Islam to own something you haven’t paid for, a transaction is effectively “here’s my cash, where’s my gold”?

Malaysia was voted by the audience most likely to be the frontrunner in launching shariah-compliant gold products.

Gold price:

More panel questions, this time on the gold price and market:

  1. The highest gold price for 2017 will be:
    1. Above $ 1275   – 29%
    2. Above $ 1375   – 36%
    3. Above $ 1475   – 23%
    4. Above $ 1575   – 12%
  1. Which of the 4 precious metals will be the best performer for the remainder of 2017?
    1. Gold – 48%
    2. Silver – 23%
    3. Platinum – 10%
    4. Palladium – 19%
  1. What will influence the gold price the most in 2017?
    1. Trump   – 42%
    2. Brexit   – 5%
    3. The Fed – 30%
    4. Physical supply and demand – 23%

…And what about gold price predictions:

Regular Business Breakfast gold commentator Jeff Rhodes’ view:

Gold Hi 2017:         $1425

Gold Lo 2017:         $1065

Gold at End 2017:   $1325

Ross Norman CEO Sharps Pixley:

Gold Hi 2017:         $1390

Gold Lo 2017:         $1148

Gold at End 2017:   $1350

Philip Newman Director, Metals Focus:

Gold Hi 2017:           $1475

Gold Lo 2017:           $1146

Gold at End 2017:     $1400

Harish Pawani, Owner Bin Sabt Jewellery:

Gold Hi 2017:           $1325

Gold Lo 2017:           $1185

Gold at End 2017:     $1250