JEDDAH, 21 May 2007 — Saudi consumer demand for gold in the first quarter of 2007 increased seven percent from the same period last year, with jewelry up seven percent and net retail investment up by three percent, the latest quarterly report released by the Dubai-based regional office of the World Gold Council (WGC) said. Total gold demand in Saudi Arabia in the first quarter of this year reached 25.9 tons.
Demand from the pilgrims bodes well for the industry, coupled with the Council of Ministers’ decision on March 26 to reduce import duty on imported jewelry to five percent from 12 percent, which is expected to improve the product offering and reduce selling prices.
Jewelry demand in the UAE at 27.8 tons was also seven percent higher than during the period a year earlier. This was 24 percent higher year-on-year in dollar terms, achieving an all-time record for any quarter. In Kuwait, Bahrain, Oman and Qatar, total demand was 10.5 tons — an increase of five percent in tonnage and 23 percent in dollar terms.
Figures released by the WGC over the weekend showed global demand for gold reaching $17.4 billion, more than double the level four years ago. The figures, compiled independently for WGC by Gold Fields Mineral Services Ltd., showed total identifiable demand for gold in the world in the first quarter of 2007 was four percent higher than first quarter of 2006 in tonnage terms and 22 percent higher in dollar terms. Total demand reached 683.6 tons.
Spurred by strong economic growth in key markets and a less volatile gold price, combined with a sustained promotion, jewelry demand was 17 percent higher than the first quarter of 2006 in tonnage terms. Net retail investment was 28 percent higher in tonnage terms and 51 percent higher in dollar terms, in the period under review.However, slower growth of gold-backed Exchange Traded Funds (ETFs), compared to first quarter of 2006, resulted in total identifiable investment falling 26 percent in tonnage terms and 13 percent in dollar terms. Total identifiable investment reached 128.5 tons.
Industrial demand was up slightly, one percent higher in tonnage terms and 18 percent up in dollar terms.
Overall demand in the Middle East region (Saudi Arabia, the UAE, Kuwait, Bahrain, Oman, Qatar and Egypt) was eight percent higher in the first quarter than a year earlier in tonnage terms, 26 percent higher in dollar terms. Jewelry demand rose by eight percent and net retail investment, which is small in this region and largely accounted for by gifts, by four percent. There where a number of common factors supporting demand in the region. Consumers have become more used to higher prices. Continued high oil prices, compared to levels of 2004 and earlier, have contributed to booming economies. Tourism levels so far in 2007 have been good while the sustained promotion and increasing good product offering is also stimulating demand.
Against this, demand per head in the Kingdom, the UAE, Kuwait and other Gulf states is already high, while competition, both from other forms of jewelry and from other lifestyle products, continues to grow. In Egypt, market is fundamentally strong, and economic trends in the first quarter, including tourist numbers have been positive.
The Turkish economy was generally strong in the first quarter and jewelry demand benefited from stable prices, which were lower than the peaks reached during the second quarter of 2006 at the time of the financial crisis and thus encouraged buying.
“Consumers continue spending on gold jewelry buying. Again gold demand has started to increase in tonnage or value, whether gold jewelry, gold coins or gold bars,” Moaz Barakat, WGC’s managing director in the Middle East, Turkey & Pakistan, said. Demand in the world’s largest gold market, India, also surged in the first quarter, rising by 50 percent in the first quarter 2006 figures.
In China, the new Chinese year impacted strongly in the first quarter of 2007, providing a further boost to already robust growth in global demand for gold.
In the United States, third in the world in gold demand, the demand reached 60.4 tons this quarter, a fall by five percent in gold jewelry and nine percent in both gold jewelry and retail gold investment compared to the same period of 2006.
“In general the outlook for the second quarter is looking very positive with good jewelry demand in most key markets,” the report said. “Overall prospects for investment continue to be positive with a number of underlying political and economic factors well-aligned and an increasing number of gold investment vehicles, including ETFs, available,” it added.