Sales of gold in the UAE increased from Dh2 billion in the third quarter of 2006 to Dh2.5bn in the third quarter of 2007, according to the World Gold Council.
The UAE gold consumption in terms of tonnage increased from 23.9 tonnes in the third quarter of 2006 to 26.3 tonnes in the same period of 2007, which was a 10 per cent increase.
Demand, which remained strong throughout the Middle East, increased by 19 per cent in Saudi Arabia, 15 per cent in Egypt and three per cent in other Gulf countries.
The strong economies in the Arabian Peninsula and a recovering economy in Egypt, together with the favourable price environment for jewellery buying in the first two months of the quarter, easily outweighed the negative impact of the price rise in September.
Jewellery demand was strong throughout the quarter, and despite the steep rise in prices, which had an impact on key markets, jewellery demand rose in both tonnage and value terms.
Overall demand in the Middle East region (the UAE, Saudi Arabia, Kuwait, Bahrain, Oman, Qatar and Egypt) remained strong, showing a 13 per cent increase in consumer demand to 93.2 tonnes in the region as a whole compared to year earlier (jewellery demand increased by 14 per cent, net retail investment increased by five per cent).
In dollar terms, this was a 24 per cent increase.
Figures released by the World Gold Council showed global demand for gold reached a new record to $20.7bn, 30 per cent higher than Q3 of 2006.
The strong growth seen in the first six months of 2007 continued in the latest quarter but there was a shift in the pattern. The figures, compiled independently for WGC by Gold Fields Mineral Services Limited (GFMS), showed that jewellery demand was also strong through the quarter, but was heavily impacted in key markets in September as steep rises in price deterred buyers. Despite this, jewellery demand rose by six per cent in tonnage value in the third quarter of 2007 and by 16 per cent in dollar terms.
Total demand reached 947.2 tonnes. Net retail investment, in contrast, was relatively weak, falling by one per cent from year earlier levels, in tonnage terms to 102.7 tonnes, compared to the third quarter in 2006. Investment in Gold-Backed Exchange Traded Funds (ETFs), and institutional investors became much more active in Q3, at 138 tonnes, investment in ETFs and similar products were a quarterly record, beating even Q4 2004 (113.4 tonnes), when the largest ETFs was launched in New York. Total identifiable demand in Q3 2007 was 19 per cent higher than year earlier in tonnage terms; in dollar terms it rose 30 per cent over the same period. Total identifiable investment reached 240.7 tonnes.
Commenting on the third quarter results in the region, Moaz Barakat, Managing Director of the World Gold Council in the Middle East, Turkey and Pakistan, said: “It is clear that gold’s safe haven and hedging characteristics have been a major attraction to investors during this period of instability, greater inflationary fears and a falling dollar. Overall demand for gold rose very strongly. Investor interest will remain very strong in the near future and as the price stabilises, major gold jewellery buying consumers will adapt to a higher floor in the price.”
“The positive effect of the marketing and promotional campaigns held by the World Gold Council and its partners from the gold traders in several countries in the region has been very much apparent and had a positive impact on keeping the industry and gold jewellery demand healthy despite the rise in gold price.
A combination of strong economies with rising wealth, favourable price trends for most of the quarter and increased promotional spending, notably by the jewellery trade, were the main factors underlying a 13 per cent increase in consumer demand to 93.2 tonnes in the region as a whole compared to a year earlier (jewellery up 14 per cent and net retail investment up nine per cent).
The UAE continued to enjoy a booming economy.
The Dubai Summer Surprises festival was again a success and the number of tourists once again increased sharply, all helping to increase the jewellery demand by 11 per cent and total consumer demand by 10 per cent. Retail gold sales in Dubai increased by 21 per cent in the third quarter of 2007, compared to the same period of 2006.
Saudi Arabia also enjoyed an economic boom. Although based on high oil prices, much of the direct impetus to growth is coming from increased government spending on infrastructure and social projects and this in turn is generating higher incomes throughout the country and thus supporting consumer spending, including that on luxury products such as gold jewellery. The reduction in customs duty on imported jewellery from 12 per cent to five per cent, which took effect in March, is helping to improve the range of products on offer.
The world’s largest gold market, India, after the rapid increases recorded in the first half of the year (317.2 tonnes), saw the third quarter bring a change of pace to gold demand in India. Total consumer demand reached 185.1 tonnes.
Gold, which was range-bound on Tuesday, has lost about three per cent since hitting a record high of $914 in January, but long-term sentiments remain strong.
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