Gold imports & sales plunge in Gulf countries

March 15, 2009

Commodity Online
DUBAI: Global economic meltdown is telling it hard on gold sales and bullion markets in the United Arab Emirates (UAE) and Saudi Arabia. Rising unemployment, crash in realty prices and plunging stock markets have taken the sheen out of the gold market in all the major cities across UAE and the Saudi Kingdom.

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While gold sales in UAE cities like Dubai, Abu Dhabi and Sharja have plunged by nearly 70%, gold trading volumes have dipped in Saudi Arabia by at least 50% in February.

”Gold sales across the Gulf countries have dipped drastically thanks to lower tourist arrivals and the crash in property prices,” Mark Robinson, a bullion analyst based in Dubai told Commodity Online.

He said compared to January sales, February sales and imports of gold have considerably gone down in once glittering business and gold destinations like Dubai and Abu Dhabi. “This is just the beginning. I expect gold sales to plunge further in March if the global economic condition worsens,” Robinson pointed out.

According to figures from the Saudi Arabian Mining Company, gold sale volumes have fallen 12.3% to 128,000 ounces in 2008. “The sales volumes for gold were 146,000 ounces in 2007,” the company said pointing out that the average selling price for its gold nearly doubled last year to US$877 per ounce from US$445 per ounce a year earlier.

Last year, the company had produced 146,000 ounces of gold, up from 143,000 ounces the previous year.

Investors use gold as a safe haven in the wake of the depressing economic conditions and investments on other assets. But Robison says the surge in gold prices have ensured that people are losing their purchasing power to buy gold and jewellery items. “The fact is that increasingly people do not have any money to buy gold that is very expensive. That is the main reason for the plunging gold sales across the Middle Eastern countries and nations like India and China,” he added.

Gold sales in Dubai, known as the City of Gold, have always been dependent on tourist arrivals. But leading jewellers said every month the inflow of tourists are going down, leading to a downtrend in gold purchases. “There is not much sales happening in gold these days,” says a manager with Joy Alukkas, a leading gold and diamond jewellery chain across the Gulf countries.

According to Tushar Patni, Chairman of Abu Dhabi Gold & Jewellery Group, the gold jewellery sales in cities like Dubai and Abu Dhabi have plunged by a massive 70% in February. “There is a gloom in gold markets across the Gulf cities as people are not willing to buy gold at this high price,” Patni said.

He said retail sales of gold in Dubai and Abu Dhabi—two important cities for gold trading—have dipped by at least 70% in February. “If this trend continues, bullion market will remain stagnant with not much business happening in the next few months,” Patni said.

Dwindling property prices, daily reports of thousands of job losses and decline in tourist arrivals have adversely hit the gold sales in Dubai. Retail sales of gold and gold jewellery had crashed by as high as 60% in January despite the Dubai Shopping Festival.

A sharp decline in the sales of gold has been reported by leading gold chains in Dubai, known as the City of Gold. Gold retailers such as Joy Alukkas, Damas, Pure Gold and Atlas Jewellery have launched several innovative promotions schemes and prizes to lift the sagging gold sales in Dubai.

Gold sales in Dubai's traditional jewellery market have collapsed mainly because of the decline in tourist arrivals. Local jewelers who have been waiting for a big chunk of tourists said that less and less tourists inflow to the city has badly affected the sale of the yellow metal.

The jewellery sector had its ups and downs during the second half of 2008 with a significant increase in Q3 (Dh4.3 billion) in Dubai followed by a slight drop in gold jewellery consumption in Q4. In UAE, the increase in gold demand reached 22% in tonnage terms; equal to 56% increase in value terms.

American jewellery retailer and manufacturer Tiffany & Co recently said that that trade fell sharply during the crucial November-December holiday period. Worldwide gold sales declined by 21 per cent to $687.4 million compared with $867.3 million in the same period in 2007.

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