What is a Dirham or Dollar Worth These Days?

I have been living in the United Arab Emirates for the last 15 years and have been around when they shrunk the 1 dirham (28.5 mm to 24 mm) and 50 fil (25 mm to 21 mm) coins, and have enjoyed collecting the old 1 dirham coins and new 1 dirham commemorative coins. Was also around when they introduced the 20 dirham note and when they reintroduced the 200 dirham bill.

UAE 1 Dirham and 50 Fil Coins & 20 and 200 Dirham Notes

At that point in time, I hadn’t figured out what the need for this was, but now know that this is one of the signs of inflation. As the 1 dirham coin began to purchase less and less, it was necessary to have more 1 dirham coins to carry round, so reducing its size is the best way to go. Before the 20 and 200 dirhams bills came along, there were no bills between the 10 and 50 or the 100 and 500, but as the currency devalues, its more convenient to hold two 20 dirham notes over four 10 dirham notes and what use to cost 100 dirhams is now getting closer and closer to cost 200 dirhams.

After learning that the US dollar has lost over 95% of its value over the last 100 years, I was curious to find out what the UAE central bank decided what the value of 1 AED was worth when it was established. When the first reminisce of the UAE Central Bank came into effect in 1973, it was setup in order to create a currency for the 2-year old nation and to replace the currencies currently in circulation (Bahraini dinar, Qatari riyal, and Dubai riyal). After the currency was setup in May 1973, fully backed by gold and foreign currencies, the dirham was worth 0.186621 grams of gold and pegged to the US dollar at 3.94737. So over the last 38 years since the UAE currency was setup, the dirham has lost over 97% of its value, as 1 dirham in 1973 is worth over 37 dirhams today.

As the UAE Dirham is pegged to the dollar today, any money printing (aka inflation) being created in the United States is imported here and as a result prices of things are going up. As the UAE central bank doesn’t disclose the amount of gold it holds in reserves, though many believe it to be negligible, its hard to tell whether they would be ready for the upcoming financial/monetary collapse and to de-peg from the dollar. In the GCC, Kuwait holds 12 percent of its reserves in gold, Saudi has 2.7%, Qatar has 2.3%, Bahrain has 4.7 tons, and Oman has none, while the states have historically maintained less than 5% in gold and instead have been heavily invested in US Treasury notes and bonds. With all the gold purchase by countries like Russia, China, Mexico, and India since the 2008/9 financial collapse, and Dubai being such a heavy player in the gold market in the region and Abu Dhabi having the largest sovereign wealth fund in the world, I am hoping the UAE central bank has a reasonable weighting of gold in its foreign reserves, if it didn’t before the collapse. I will continue to purchase gold and silver as it is not effected by US inflation and hopefully when the UAE de-pegs from the dollar, I wont mind converting my precious metals into dirhams.

Inflation in your Grocery Bag

Since the end of last year, I’ve known that food inflation was coming. And little by little, I’ve seen the prices rise on products like sugar, rice, etc., while other products have tried to hide inflation by reducing the product quantity or quality. My first encounter with inflation was with the large bottled water I use with the water dispenser, as they had upped the price from 3 to 5 dirhams, so now I take my bottles to the company’s location and get it at 2.50. I hadn’t bothered doing this years ago, though I knew I could get it for 1.50 instead of 3, because in my mind I thought it was a waste of time and gas. My next encounter was with 2-litre bottles of juice that I regularly buy. The grocery store nearest to me carries 3 brands of these 2-litre juice bottles and each of the brands did something different. Al Rawabi decided not to change the quantity of juice, so the price went up 50 fils. Al Maria decided to slim down their bottle and decreased it to 1.75 liters. Nadec decided to slim down their bottle and decreased it to 1.8 litres. Its possible that the companies have also changed their ingredient quantity in their juice, but that’s something that I wasn’t paying attention to. Other encounters include hidden inflation in bread, hidden inflation in custard deserts (125g to 100g), price inflation in sugar (2kg from 4 to 8 AED), price inflation with fruit yogurts (1 to 1.5 AED) and price inflation in soft drinks like Pepsi (1 to 1.5 AED). So as inflation continues, I have been advising people to purchase extra now for storage, as prices are only going to be going up.

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8 Responses to What is a Dirham or Dollar Worth These Days?

  1. Bruce Ray says:

    Sir,

    Can you tell me why Dubai spot prices are typically higher than London gold spot prices?

    • Yousuf says:

      Dear Bruce,

      Dubai fixes its gold price twice a day and as such, its not a dubai spot price, but a dubai fixed price. The Dubai fixed price is calculated by taking the london am or pm fixed price per gram in UAE dirhams (AED) and then rounding up to the closest quarter and then adding an additional 2 dirhams. This additional 2 dirhams and rounding up is the base premium paid on gold bars equal to and under 100 grams and jewellery, though bars and jewellery will also have additional making charges.

  2. shajahan says:

    Assalam alaikum Yusuf

    Thank you for your excellent website and information which is an excellent resource.

    I just wanted to know if you can advise me of a checklist of what I need when going to buy Silver in dubai?
    You mentioned you had problems at the airport with your silver is there anyway around this as I am worried my silver may get confiscated.

    Thanks

    • Yousuf says:

      Salams Shajahan,

      You can check the guide for the Emirates for full details of where you can find silver in Dubai. Well I had issues at the airport as I didnt have a receipt for the silver I was bringing, but as long as you have the receipt, you shouldnt have a problem.

  3. Shajahan says:

    Assalam alaikum brother Yusuf

    Jazakallah for the response I only noticed the response today when I went onto your website.

    a few queries
    1. I have family members/friends muslims in general I am trying to convince them of what is happening to fiat currency but sadly they do not seem to want to buy gold and silver responding you can’t eat them so why buy them. Is there any advice you can give me on how to convince them about the dangers of paper money?

    2.I did the research and bought silver britannias but now am concerned I may have ended buying a neumastic coin which is also bullion.
    3.UK where I live will be a very dangerous place to live during a hyperinflation is there any place on earth in your opinion that would be a good place to make hijra to survive a hyperinflation?
    4.Mike maloney mentioned in his book CPI is not accurate as it does not include food prices etc is there any website that tells the true current inflation rate?

    • Yousuf says:

      Salams Shajahan,

      1. I have been in the same boat as you, trying to convince my family members and friends of the same thing and after many years, i’m happy to say that many of them have bought some, so never give up trying to convince them. Well i believe the main thing you have to get across to them is that gold is money, just like US dollars or euros, so just like the dollars or euros, you can’t eat them, but you can use it to purchase something to eat, as that is what money is, a means of exchange. Just like if you had dollars and went to europe, you can convert the dollars into euros to purchase something, in the same way, you can take your gold to the gold market to change it to the local currency so you can purchase something. They should convert their savings to gold and not money you use on a daily basis, and leaving it in the bank you can get a 0-4% profit, while gold will have you a 10+% profit yearly. After they get that, you have to convince them about inflation, that a dollar, euro and other currency use to be able to purchase alot more than what they can purchase today, which is caused by central banks and private banks increasing the amount of currency in circulation. These are the main two issues you have to get them to understand, so they can be ready to accept more info. As you have muslim family members/friends, you should speak to them about how it is haram and have them listen to Sheikh Imran’s “Islam & the International Monetary System” lecture, as it contains everything you’d need. For women, i’ve found that telling them to buy gold jewellery (with low premiums like bangles or 24-karat pendants) is a great way to get them into it, because if they can wear it, they are more likely to purchase it.

      2. Well the silver Britannia is a bullion coin and with the 20% UK VAT, you will spend between 50 to 100 percent above spot for each coin, so it might as well be a numismatic coin. This is why I recommend you purchase gold sovereign bullion coins which come in 8, 4 and 2 gram sizes and have no VAT (stick to ones minted in the last few years), or if you must purchase silver, buy the large silver bars of 250 grams or more, as the maximum premium you will pay is around 50 percent above spot.

      3. I believe the towns and villages will not be affected as much in hyperinflation as major cities, so that is a good place to think about moving to, if you can. You should try to find means of dealing with others outside of currency, so that you know you will be able to rely on that if you cant trust currencies.

      4. John William’s Shadow Stats website has the accurate CPI for the united states.

  4. Amira says:

    Can u please tell me what 1 UAE silver Islamic dirham is worth to the American dollar and does the year matter? And let’s say it’s a 1992 UAE silver dirham.

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