JEDDAH, 23 August 2006 — Demand for gold and gold jewelry continues to fall across Saudi Arabia. This has been amply substantiated by the World Gold Council (WGC) and owners of gold outlets who say demand for gold and jewelry has been falling in the first two quarters of the year.
Outlet owners at the main gold markets at Kandara and downtown Balad say rising gold prices have been shying the consumers away from the precious metal and its jewelry.
“I’ve had a very bad season this summer, partly because of the rising prices of gold and partly because of the summer that’s keeping the shoppers away,” Saeed Bin Omar said at a gold jewelry outlet in Balad yesterday.
Echoing the continuing drop in demand for gold, the WGC said yesterday that gold jewelry demand in the Kingdom in the second quarter of 2006 fell by 32 percent in tonnage with an increase of 60 percent gold retail investment in bars and coins as compared to the same quarter last year.
“The fall in gold jewelry demand has been mainly due to high and volatile gold prices plus the insecure situation of the Saudi stock market since its slump that was witnessed toward the end of February. These factors have highly affected both consumer sentiments and the purchasing power of individuals,” Moaz Barakat, WGC’s managing director for the Middle East, Turkey and Pakistan, said.
Moreover, volatile gold prices have prompted many individuals to sell part of their gold savings and gold investments in bars, coins and gold jewelry to make high profits resulting from high gold prices.
Total demand in the Kingdom reached 35.6 tons in Q2. Also, a few main gold jewelry traders across the Gulf have almost sustained the level of their gold jewelry sales in Q2 to be of the same level of the exceptional Q2 last year. This has been due to heavy promotional activities that had a direct impact on their sales during the Kingdom’s main wedding and gifting seasons, he added.
As for the rest of the Gulf, the value of demand rose by 10 percent in Q2 for the region as a whole, but price volatility hit all markets badly in tonnage terms.
In the UAE, the demand suffered less due to high tourist numbers in the quarter as compared to the same period last year. Gold demand fell in the UAE by 21 percent reaching 25.9 tons. As for Kuwait, Oman, Bahrain & Qatar, total gold demand was 10.9 tons.
In Egypt and Turkey, there was a slight recovery of gold jewelry demand. Although it fell by 30 percent in Egypt, there was a remarkable recovery of demand in Turkey from 43 percent in Q1 to only a three percent fall in Q2. Also the net retail investment increased 45 percent in Q2 in Turkey, while it fell by 25 percent in Egypt.
“The rise in world gold prices affected the demand in tonnage terms as expected along with a clear impact because of the local stock markets in the Middle East-Gulf region. However, at the same time consumers are now spending more money on gold because of their belief that buying gold is one of the best ways of saving as well as investment. We’ve seen that a lot of consumers have benefited from rising gold prices by selling part of their gold jewelry or bars to earn high profits,” Barakat said.
