“As an outcome of this, many investors are leaving the market and sacking employees,” said Ziyad Farsi, MCCI deputy chairman.
Speaking to Al-Eqtisadiah business daily, he emphasized the fact that the investors are left with no other option despite their desire to stay on. “The steady increase in the prices of the yellow metal over the past three years has put investors in a precarious position. As a result of declining sales, many of them incurred huge losses. Some of them diverted to other projects to save their huge investments in this vital sector but to no avail,” he said.
Farsi said that sacking of employees is in accordance with the regulations set by the Ministry of Labor. “Even though ways of retrenching the workers differ, this is done in line with the regulations,” he said while noting that the absence of a unified contract stands in the way of complying with the ministry’s rules in some cases.
According to Farsi, the global market witnessed a weekly loss of 3.5 percent last weekend, the worst weekly loss in the past two months.
However, Farsi said the prices are expected to surge in the near future because of increased demand from investors seeking safe haven in the wake of fluctuations in the value of major currencies. He said any fall in prices of gold in the global market would be a temporary phenomenon.
The chamber official ruled out the move by some leading portfolios to sell a portion of their gold reserve to compensate their losses in the capital market as the reason for the current fall in gold prices. “These portfolios are very few in number and they cannot influence the global prices. Most countries are not ready to sell even a single portion of their gold reserves,” he said.
According to Farsi, one of the major factors for a further rise in gold price in the coming year would be the increase in consumption by China, the most populous country in the world. China’s consumption of gold is expected to register an increase of 50 percent, reaching 400 tons during the year 2011 despite Beijing’s production of 350 tons. This is more significant when compared with the 2010 consumption by China that reached 270 tons.
Farsi said the global gold market would not witness a correction unless there is a strong reversion that would continue for a long period. “Such a reversion is going to happen only in case of another global economic meltdown,” he said.
Farsi said the Makkah gold market would continue its slowdown. “The increase in sales during Haj and Umrah seasons is not sufficient to make up for losses incurred rest of the year,” he added.
