JEDDAH, 22 May 2008 — Gold demand in Saudi Arabia has decreased by 25 percent in the first quarter (Q1) of 2008. It, however, increased by seven percent in dollar value, which is attributed to the declining value of the dollar.
Thus, the Kingdom has moved backward by seven percent in gold demand globally, the World Gold Council’s (WGC) Dubai-based regional office said in its Q1 report yesterday. “Egypt was the region’s exception in demand increase,” Moaz Barakat, managing director of the WGC in the Middle East, Turkey and Pakistan, said.
The sharp rise in the gold price in mid-March was a key determinant of movements in gold demand in Q1. It resulted in total demand falling in tonnage terms from year-earlier levels by 25 percent in Saudi Arabia, 19 percent in the UAE and 30 percent in other Gulf countries. Accordingly, the Kingdom moved backward to number seven in gold demand in the world.
There was a notable exception in Egypt, where gold demand increased 15 percent to reach a total of 18 tons in Q1. The rise in the gold price provoked a surge of both jewelry and investment buying in Egypt due to the widespread belief that the price was going to rise further. The surge in gold price affected markets worldwide. India, for example, which is the largest market for gold and also has the most price sensitivity, continued to suffer from the impact of high and volatile prices as gold demand dropped by almost half the levels of Q1 2007.
A minor factor also affecting the comparison was the evolution of the Hijri calendar, which means that the beginning of 2007 benefited from the gold buying associated with the Haj season and Eid Al-Adha. Early indications are that demand in Q2 will be more buoyant than in Q1. Demand of gold jewelry appears to be optimistic, especially in the Kingdom in Q2 due to the approach of the holiday.
