JEDDAH, 30 August 2004 — Saudi Arabia’s retail gold jewelry sector is looking up. Demand for gold jewelry has been increasing across the Kingdom in 2004.
The retail gold jewelry demand in the Kingdom increased by 11.9 percent in the second quarter of 2004 compared to the same period of 2003. This is based on official statistics issued by the Jeddah-based consultancy office of World Gold Council whose regional office is located in Dubai.
“The Kingdom’s gold jewelry consumption in terms of tonnage increased from 37.3 tons in the second quarter of 2003 to 41.7 tons in the second quarter of 2004, while retail investment (bullion coins and bars) consumption decreased slightly for the first half of 2004 by 1.7 percent compared to the first had of 2003.
The report on gold demand, prepared by Gold Field Minerals Services Ltd. in London for the World Gold Council, stated that despite the economic and political situations around the globe, the gold market remains healthy and growing in Saudi Arabia and the Middle East since the beginning of 2004. For instance, gold sales in all Gulf states have increased in the first three months of 2004: in the Kingdom the increase was by 23 percent, the UAE 22 percent, while Kuwait witnessed a better increase of 28 percent. Other countries in the Gulf witnessed an increase in gold sales like the 20 percent increase in Bahrain, 18 percent in Oman, and 5 percent in Qatar. The increase in sales in the Gulf demonstrates the high affinity consumers have toward gold and gold jewelry against other luxury products.
“The good performance in the Kingdom and the rest of the Gulf has been the result of several factors: the rise in oil prices in the last two years that encouraged consumers to spend more in the region. Gold market has benefited, too, from the increasing numbers of tourists inside the Kingdom (national tourism) and Umrah performers,” Usama Alwazir, Gulf manager in the World Gold Council, said yesterday.
“Investment in gold, as a financial asset against stocks and bonds has increased in the Middle East in the first half of 2004 by more than 6 percent in-line with the global trend. Gold provides a security against inflation and is an excellent risk diversifier asset in any investment portfolio. The rise in world gold prices along with several global political and economic factors has increased retail investment purchases in several countries in the world, including the Middle East,” he added.
Internationally, total gold demand increased by 11 percent in the second quarter of 2004 in tonnage terms, 25 percent in dollar terms.
The demand benefited from strong economic growth and absence of price volatility. In India, gold jewelry demand increased slightly (1.5 percent) and has been more buoyant in retail investment (13.8 percent). In East Asia, consumer demand jumped almost by third in China, 10 percent in Japan, and substantially in Vietnam (50 percent). Total increase in the Middle East was 10.5 percent. However, the star performer was Turkey (36.3 percent), followed by Kuwait (14 percent), then Saudi Arabia (11.9 percent). In the United States, gold demand increased by 4 percent. As for Europe, the trends remained generally negative (- 5 percent), however; there was a year-on-year rise in 18 carat gold jewelry (growth of 13% in hallmarking) because of the increased demand for more stylistic and jewelry accented pieces.
Industrial demand was 7 percent higher in the second quarter of 2004 than in the same period in 2003 primarily due to the rising demand for electronic components (particularly in East Asia).
As for institutional investment in gold, the demand is thought to have fallen due to the absence of any further price gain (absence of gold price volatility), and the strong performance of the dollar (since the dollar is an important inverse driver of the gold price).
