Gold selling at heavy discount in Dubai amid Iran war tensions – What could be the impact on India’s gold prices?

In Dubai, gold sellers are giving big discounts because of the rising tensions and war fears in the Middle East. Experts say these problems could make it harder to move gold and could change the price of gold in India.

Tensions in the Middle East are heating up, and signs of disruptions have begun showing in global markets for commodities. As the crisis with Iran escalates, Dubai – the international gold trade capital is selling bullion at discounts amid logistics disruptions and collapsing demand.

Dubai is known as the “City of Gold” for its huge bullion trading market. Dubai typically sells gold at a premium to India due to lower import duties and taxes. With military threats looming over the region, air traffic has been suspended and shipments of gold have slowed down. Bullion dealers across Dubai are discounting gold bars in a hurry to offload their inventory which they cannot easily ship elsewhere.

These sharp price movements are also starting to impact India, which is the 2nd largest gold consumer in the world.

Dubai Sells Gold at Discounts Amid War with Iran

Let’s take a step back. Under normal circumstances, gold prices in Dubai are cheaper than in India. Why? Taxes. In Dubai, UAE levies negligible import duties on gold and also charges a lower rate of taxes on buying gold. In India, every purchase of gold attracts customs duty and GST.

Typically gold costs 5-7% less in Dubai than what it costs in Mumbai/Pune/Kolkata etc.

Dubai’s gold market is huge and ultra-competitive with high volumes. These factors have traditionally helped keep gold premiums low in Dubai, making it one of the most attractive markets for tourists and international buyers.

Fast forward to today, the situation is far from normal.

Uncertainty caused by war is making traders discount gold, not taxes.

Iran and multiple Saudi airstrips have banned flights leaving very few options to transport gold by air. Freight shipments are getting slowed down too.

Bullion traders are struggling to move their gold out of Dubai. Many are offering discounts just to make some sales.

Gold prices are rising in the global market because investors tend to buy gold as a safe haven when there’s geopolitical uncertainty. The national price of gold usually rises when there is a crisis. But in Dubai, gold prices are falling because traders cannot get their products to market.

Also read: Today Gold, Silver Rate March 06 LIVE: Check 18, 22, 24 carat Gold prices in Chennai, Mumbai, Delhi, Kolkata

India Could Face Supply Crunch if Tensions Persist

India depends on imports to meet its gold demand. A large portion of gold that India imports transits through Dubai. Any slowdown in supply due to the conflict will have an immediate bearing on India.

Analysts are saying that if this situation persists, it could create supply issues for India’s gems and jewellery sector. Prices in India could rise if the supply of gold slows down. India’s peak wedding season and festivals are right around the corner so any further spike in gold prices will have an impact on consumer demand.

India’s retail gold demand has already witnessed a decline because of volatility in gold prices. Buyers are waiting on the sidelines for some stability before they enter the market.

Global Gold Market Watches War Hawk Close-up

Uncertainty around military actions in Middle East will continue to dominate news cycles for the foreseeable future. If the situation escalates, it could have serious repercussions on global supply chains – not just gold but oil, currencies, stocks & bonds.

Traders are cautiously watching the situation and waiting for it to unfold. If you’re an Indian consumer, cheaper gold prices in Dubai look enticing. But if the war with Iran stretches on, it could have an adverse impact on supply of gold to India and drive domestic prices even higher.