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By Clarence Michael

The “City of Gold,” as it is rightly called, is one of the major international centers for gold and diamond jewelry, and will also become a key locale for colored gemstones in the near future, according to industry experts.

Gold jewelry displayed at the gold souk in Dubai. Photo © jonarnold.com.

The Emirate of Dubai, part of the seven-sheikhdom federation of the United Arab Emirates (UAE) in the Arabian Gulf, is a commercial hub for the region. With a huge existing demand for gold, there’s also high potential for other jewelry items, and the diamond industry has been quick to catch on.

At last year’s International Jewelry Dubai (IJD), the Diamond Trading Corporation (DTC) of De Beers held a dedicated “Diamond Day” to announce its new marketing program in Dubai and the Gulf region.

Figures do not lie. The DTC says sales in the Gulf region went up by 40 percent in the first half of 2004, making it the third-largest market in the world, with $1.5 billion in annual sales.

Much of Dubai ’s commercial success can be attributed to tourists’ shopping, done at places like the Wafi shopping center in Dubai (top). Dubai ’s famous gold souk, the center of the city’s jewelry trade (above). Photos © jonarnold.com.

“This is the kind of trigger that would work well for the growth of the gemstone and precious stone industry,” according to Manish Bhatia of New Gold Centre, a complex of gold and jewelry shops.

Dubai’s economy is strong right now, with international non-oil trade growing by 41 percent between 2003 and 2004 to a total of 215.7 billion United Arab Emirates dirhams (AED), or US$58.5 billion. The growth in this category has averaged 25 percent over the past four years, fueled by Dubai’s relaxed trade policies and a booming real estate market that has led to increased wealth in the region. During the same period, gemstones, metals, and other jewelry products posted an increase of AED 3 billion ($817 million), for a total import payment of AED 20.2 billion ($5.5 billion).

The center of Dubai’s jewelry trade is its famous gold souk, a densely crowded market area where tourists and locals alike come to buy gold jewelry for personal adornment and investment purposes. Current industry statistics show that approximately 45 metric tons of jewelry were manufactured in Dubai in 2003 using scrap gold and bullion bars. This figure is anticipated to increase 25 percent by 2008.

What feeds this buying? It is the lack of tax for Western tourists and the ever-rising appetite and demand for gold jewelry from the Indian subcontinent.

The rapidly-developing tourism industry is estimated to reach 12 million visitors to Dubai by 2014, and 90 percent of them buy jewelry.

With no sales tax, Dubai is one of the cheapest places in the world to buy jewelry and gold. The amount of gold jewelry consumed locally is 40 to 50 metric tons, but the shopping done by wealthy Western tourists who flock to Dubai en masse is drastically higher. Sales of gold jewelry during the Dubai Shopping Festival alone amount to between nine and 10 tons.
Just as tourism from the West has picked up due to the free-wheeling lifestyle in Dubai, there are also more regional tourists flocking to the city. Residents from other countries in the Middle East accounted for 34 percent of Dubai’s tourists in 2004, while Europeans were 32 percent of the total and Asians were 23 percent.

On the investment side, millions of Asian workers from the Philippines, Sri Lanka, Pakistan, Bangladesh, and India, residing in Dubai as expatriate labor, find it an ideal and cost-effective place to buy gold, especially in the form of jewelry.

Buyers in Dubai are increasingly looking for fashionable designs in high-karat gold. Pictured is Stenzhorn’s Tutti Frutti collection.

The numbers are self-evident: Consumer demand for gold, which was 50.9 tons in 1997, grew to 93.4 tons in 2002. Jewelry sales jumped from 37.9 tons in 1997 to 88.3 tons in 2002. While the numbers did fall from 2001 to 2002, the reason for that is clear. The most important actor of the Dubai gold market for decades, India, changed its trade policy for gold bullion by giving permission to local banks to import gold directly.

The region’s thirst for gold has gradually translated to an awareness of colored stones. According to K. T. Baiju, general manager of the Dubai Gold and Jewellery Group (DGJG), the gemstone sector has seen significant growth in the past three years. This has been mainly due to consumer awareness of jewelry with gemstones as well as the DGJG’s frequent promotions. He is confident that along with gold and diamond jewelry, gemstone jewelry will gradually gain its share of the market.

Bold golden pendants from Laurentia’s Atomi line.

“The colored stone segment is growing in Dubai, with nearly 150 retailers stocking various ranges of items. Increasingly, more retailers are using this product mix in order to lure more consumers,” he says. “It’s only in the past three years that most of the buyers are turning to stone-studded jewelry. Otherwise, it was always gold, gold and sometimes diamond.”

The DGJG, with over 600 members, represents all sectors of the trade, including bullion trade, manufacturing, wholesale, and retail. The group was established in 1996, mainly to support the first Dubai Shopping Festival, which has become an annual event. Now, it has evolved to become a prestigious trade body committed to developing and sustaining Dubai’s status as the “City of Gold.”

With this came the Dubai Metals & Commodities Centre’s (DMCC) dedicated building — the Jewellery & Gemplex. Open to international and regional jewelry manufacturers, the facility has been offered to members on a freehold basis and is gearing up to support Dubai’s own burgeoning jewelry industry and its international integration objectives.

“The colored stone market here was supply driven until a year ago,” says Baiju. “But now it has become consumer driven, following the awareness being created both by the jewelry retailers and marketing campaigns by some retailers. With this, the demand is being created, and it is growing steadily, because buyers no longer look at stones for the adornment value alone. It is also because of the fashion-conscious consumers who have begun to look at color per se in fashion and style.”

A night view of Dubai , or the “City of Gold.” Photo © jonarnold.com.

To capitalize on this trend, the DGJG has created training programs to educate retailers about gemstones and is planning to host a conference on gemstones early in 2006.

European and Asian jewelry manufacturers have been targeting the Middle East as a growth market, but without industry promotion, colored stones face an uphill battle.

As a case in point, Baiju cites a recent visit from a delegation of Australian jewelry companies, who exhibited jewelry featuring colored stones and pearls as well as gold and diamonds. “Some of the delegation members have signed up for alliances with retailers here,” says Baiju. “Thus, prospects for this colored stone segment are bright.”

July/August 2006 • Dubai: Color in the City of Gold • Reader's Choice Award: Hometown Girl • Gem Imports: U.S., Europe, Japan • In This Issue