DUBAI, 10 June 2008 — Strong gold prices are unlikely to put the brakes on imports of the precious metal into Dubai, despite a recent fall in purchases by the Gulf Arab emirate known as “the City of Gold,” industry executives say.
Gold’s surge to multi-year highs earlier this year scared buyers in many parts of the world and pulled down Dubai’s first-quarter imports by 7.6 percent to 122 tons.
Last year, gold imports reached 559 tons on investors’ appetite for the metal, while exports hit 287 tons. Dubai, the Gulf’s commercial hub, has the highest concentration of jewelry shops in the world, generating trade worth $35 billion last year — 20 percent of the $173 billion total global jewelry trade.
“Dubai will finish this year with the same level of gold imports we have seen last year regardless of the high volatile prices,” said Moaz Barakat, managing director of the World Gold Council in the Middle East, Turkey and Pakistan.
“Imports are not directly related to price only. You have other factors like exports and industry demand,” he said.
Spot gold powered to a record of $1,030.80 an ounce on March 17 on record-high crude oil, fears of inflation and expectations of more rate cuts in the United States, making the metal more attractive as an alternative investment.
Gold has since fallen, but rose to a high of $900.30 an ounce on Friday on record oil prices and a dollar drop after data showed a sharp rise in US unemployment and as equity markets slipped on worries about economic growth.
“On the jewelry side, buyers tend to adjust to prices quicker in this region, and on the investment side, when there is a bullish sentiment, you get investors pouring money into gold,” said Tawhid Abdullah, manager director of the Dubai Gold and Jewelry Group.
“We are also seeing higher export demand from other regional markets, so I think we will comfortably see higher import figures this year,” he told Reuters.
Dubai’s gold and jewelry trade is fuelled by demand from the Arab world and India, the world’s number one gold market.
Gold trade through Dubai reached $7 billion in the first quarter, up 71.5 percent from the same period a year earlier, while exports surged 74.2 percent to 115 tons, the Dubai Multi Commodities Center (DMCC) said in May.
Tax-free jewelry in the gold souks and shopping malls in the United Arab Emirates — the seven-member federation that includes Dubai — draws Gulf Arab and Western tourists.
Drops in sales volume of gold jewelry and bullion imports earlier this year have deepened anxieties among traders that the emirate may lose its luster as a regional gold hub.
Traders fear high and volatile prices could scare off gold jewelry buyers in Dubai, but analysts say a growing number of Western tourists will drive demand for the yellow metal higher.
“More than 60 percent of gold purchases in Dubai is done by the tourists and (as) their number rises, it is likely that demand and gold imports would surge higher,” said Pradeep Unni, analyst at Vision Commodities Services in Dubai.
“In the coming weeks the city will also see more expatriates going on summer vacations and gold gifts are generally seen as a must before the travel,” Unni said.
