UAE Gold Sales Rise 41% in Q3

Gold sales rose dramatically in the United Arab Emirates, shooting up 41 percent in the last quarter to 2 billion Dirham ($544.48 million). Still, demand for gold jewelry in the region overall was practically flat, even decreasing a fraction of a percent.

UAE gold consumption in terms of weight was stable thanks to high tourist numbers in the third quarter, in spite of an increase in the cost of living, especially in Dubai.

The decrease in demand for gold jewelry was most noticeable in 22K jewelry items, favored by Indian tourists. It offset retail purchases of investment items such as gold coins and bars, which rose by 5 percent. Total demand reached 22.9 tons, equivalent to the demand in the third quarter of 2005.

In Saudi Arabia, total demand for gold fell by 9 percent to 33.9 tons due to high and volatile world gold prices, in addition to, the impact of the stock market slump that occurred in the first half of 2006. The fall in the stock market affected consumer’s purchasing power, especially among middle-income consumers.

However, while gold jewelry demand in Saudi Arabia decreased by 10 percent to 31.6 tons, demand for gold coins and bars increased by 5 percent to 2.3 tons.

Local observers are expecting fourth quarter gold demand in Saudi Arabia to increase due to the upcoming annual Muslim pilgrimage, the Hajj, and the possibility of reducing gold jewelry customs tariff in the country from 12 percent to 5 percent.

Gold demand in the rest of the Gulf States - Kuwait, Oman, Bahrain, and Qatar - declined by 9 percent to 12 tons.

In other Middle East countries, a small increase in gold demand was seen. After a 43 percent drop in demand in Turkey during the first quarter, only a 10 percent decrease was registered in the third quarter. In Egypt, total gold demand fell by 16 percent: 15 percent in jewelry and 60 percent in retail investment, again this was blamed on global prices.

According to Moaz Barakat, managing director of the World Gold Council in the Middle East, Turkey, and Pakistan, while the volatility in gold prices affected demand, “consumers have become comfortable with the range of $570 to $600 per ounce.”

Further, he found that marketing and promotional campaigns held by the Council and its partners in several countries in the region have “been very much apparent on gold jewelry demand, especially with the stability of world gold prices. This is very much similar to the Council's role in increasing world retail investment demand through the Gold-backed Exchange traded Funds (ETFs) launched by the Council in several world stock markets.”