JEDDAH, 17 May — The ongoing Palestinian intifada has resulted in a drop in demand for gold in Saudi Arabia and the rest of the Gulf. Gold demand in the Kingdom fell in the past few months. This was reflected in its lower import.
“The Kingdom experienced a relatively poor start to the year as gold offtake declined to 56.5 tons, 11 percent lower year on year. This was reflected in lower import figures; gold imports fell by seven tons to 33 tons. The rise in gold prices and the political tension in the region together caused the downturn in demand,” World Gold Council’s Gulf Manager Usama Alwazir explained yesterday.
He said total offtake in the Gulf declined 10 percent in the first quarter. Unlike recent years, Eid Al-Adha did not coincide with the annual Dubai Shopping Festival. There was also a flare-up in political tension in the region toward the end of the quarter resulting in the rise in price and fall in demand.
The conflict in the Middle East in general has led to a drop in spending on gold jewelry. “At the same time, however, it has been proven that saving and investing in gold continued. However, there will be a revival of gold jewelry demand in the second quarter of this year due to the wedding season and the annual summer shopping festivals in Jeddah and elsewhere in the region,” Alwazir added.
Elsewhere in the region, the first quarter gold demand in Egypt was correspondingly weak, at 29.7 tons, four percent below year-earlier levels. The period showed an increase in the trend among people to trade in old jewelry for new. Gold offtake in Turkey during the past five months was unchanged from a year earlier at 31 tons, halting the downtrend in demand that was set in motion four months ago. The Turkish lira has continued to gather strength against the dollar, appreciating by 16 percent since the beginning of the year making gold in local currency terms considerably cheaper. The implications of this currency strength for purchasing power have boosted positive sentiment, which suggests potential for gold demand to recover further during the coming quarters, he said.
Demand in India in the first quarter was 40 percent lower than a year earlier, although the extent of the fall was partly due to the exceptional strength of demand in the first quarter of last year. India’s demand is always sensitive to price volatility. In sharp contrast, Pakistan demand at 41 tons was 38 percent higher than the first quarter of last year. “Inflows of foreign aid following Sept. 11 continued to boost incomes and spending, underpinning gold purchases.
WGC’s Middle East Region Director Moaz Barakat attributed the decrease in gold jewelry demand worldwide to the sudden rise in the price of gold and its volatile status, coupled with the American economic situation in particular and the world economy in general.