Recession is beginning to hit bullion trade hard across cities in the Middle East where gold is the most actively traded commodity. From Dubai to Saudi Arabia, demand for gold has fallen by 26 percent to 53.6 tons for the first quarter of 2009 in the wake of high prices of the yellow metal and falling stock markets. The World Gold Council (WGC) said in its latest quarterly report on global gold trends that demand and consumption for gold in the Middle East fell 26 per cent during the first quarter of 2009 as economic uncertainly and high prices discouraged buyers. Around 500 tons of scrap gold entered the Middle East market in the first quarter compared to around 300 tons for whole of last year, said Jeffrey Rhodes, chief executive officer of INTL Commodities DMCC, an independent financial services firm based in Dubai. The Middle East region bucked a global trend that saw demand increase as investors bought gold as a safe haven from the economic maelstrom The largest Arab economy Saudi Arabia was the only country in the region that saw jewelry demand rise, with an increase of eight per cent, she said. The UAE saw demand volume for jewelry fall 33 percent during the first quarter of this year, while investment volume fell 15 percent. In the Middle East, where jewelry demand makes up much more of the market than investment demand, consumers tightened their belts and bought less. The report said jewelry and investment recorded similar percentage declines, with a fall of 26 percent to 49.5 tons and 28 percent to 4.1 tons respectively. “With 90 percent of total consumer demand in the region in the form of jewelry, this decline was largely down to the combination of the high gold price and a tightening of consumer spending,” said Rozanna Wozniak, investment research manager at WGC. Gold prices averaged $908 an ounce during the first quarter of the year compared to an average of $794 during the last quarter of 2008, said Wozniak. The high price had encouraged consumers to sell gold and for refineries to use scrap gold, she said. “The total volume decline for the UAE during the first quarter was 31 per cent and the volume was 16.6 tons,” said Wozniak. Egypt's jewelry demand fell by 15 percent. Dubai, the biggest bullion market for trading gold in the Middle East, has been hit hard by high prices of the yellow metal. Dubai and other leading cities in the Gulf countries have reported crash in gold sales up to 60 percent for January, February and March in 2009. It is not just Dubai, the City of Gold, that has seen bullion markets reeling under recession. Plunging gold sales, volatility in prices and economic meltdown have forced several leading gold and diamond jewelers across Middle East cities to halt all their expansion plans. “High gold prices and extreme volatility in prices are affecting us very hard these days,” said Joy Alukkas, chairman of Joyalukkas Group, a leading India-based gold and diamond retail chain with 40 major outlets across the world. He said the March 2009 earnings of Joyalukkas Group has fallen by 22 percent. “Gold jewelry business is suffering under price fluctuations and sales of gold have drastically across cities in the Gulf countries,” he told Commodity Online. He said gold sales will begin to rise in the Gulf countries once prices of the yellow metal stabilize. In the last three months, gold prices have been ranging between $800 and $1,000 a kilogram.
