DUBAI, 10 October 2007 — The pace of gold sales in Dubai and Abud Dhabi slowed in September as a rally in world market prices dented demand for the metal, industry executives said.
With the lower volumes outweighing the rise in prices, the growth in the overall value of sales year-on-year was put at 13 percent in September, down from 26 percent growth in August.
“The sudden rise of gold prices has affected sales in September,” Tawhid Abdullah, managing director of the Dubai Gold and Jewelry Group told Reuters on Monday.
“We were expecting to see a 40 percent increase. But the market is re-adjusting to the current prices, and October will be a better month.”
Spot gold rallied to $747.65 an ounce last Monday, its highest level since January 1980, mainly as a record-low US dollar against the euro ignited purchases from investors.
Concerns about the US economy and the weakness of the dollar encouraged investors to buy gold, often seen by investors as a safe asset.
Dubai, known as the City of Gold, saw the value of gold sales in the third quarter rise 26 percent on the year, Abdullah said.
Dubai is a long-established market for gold bullion and jewelry, wholesale and retail, fuelled by strong demand from the Arab world and India, the world’s main gold market.
Tax-free jewelry in the UAE’s gold souks and shopping malls draws Gulf Arab and Western tourists.
Some local traders feared gold sales volume in the United Arab Emirates could fall by about 10 percent in volume in 2007, as they did in the previous year due to both volatile and high prices. But industry executives have said the regional appetite for gold remains strong despite relatively high prices.
Record gold prices have led to an increase in the flow of scrap gold coming onto the market in Dubai in recent weeks, industry sources said on Saturday. The volume of Abu Dhabi’s gold sales fell 20 percent in September, and 10 percent in the third quarter versus the same periods a year earlier, due to high gold prices, its Gold and Jewelry Group chief said yesterday.
“September was a very quiet period for gold sales in terms of both volume and value due to the very high gold prices and October did not start on a positive note either,” Tushar Patni told Reuters.
“The market performance in September has weighed down on the third-quarter figures after we hoped for better figures earlier this year,” he said in a telephone interview.
Demand from foreign workers and residents in Abu Dhabi buying gifts to take home during the summer holiday boosted volume in the May-July period, he added.
“Some people were buying gold as we approached the end of the month, but that was not because of Ramadan,” Patni added.
“In fact if we compared the last 10 days of September to the same period last year, we found out that sales volume dropped down by almost 50 percent.”
UAE gold sales clocked up 22 percent in terms of value in the second quarter of 2007 from the year-ago period as demand from tourists increased, the World Gold Council (WGC) said in September.
Second-quarter demand rose 14.6 percent to 29.8 tons from the same period in 2006, while sales value stood at 2.8 billion dirhams ($762.5 million), the WGC said in a statement.
Meanwhile, annual inflation in Abu Dhabi, the largest member of the United Arab Emirates federation, rose to 11.3 percent at the end of June from 8.3 percent at the end of 2006, the official news agency WAM reported yesterday.
Rents and fuel costs drove the increase, the agency said, citing official figures.
Inflation in the UAE, the world’s sixth largest oil exporter, hit a 19-year high of 9.3 percent in 2006.
With the UAE dirham pegged to the US dollar, the central bank usually shadows US interest rate moves, hampering the fight against inflation.