Gold sales in the UAE rose to Dh3.1 billion in the first quarter of 2008 – a 15 per cent increase on the Dh2.7bn recorded in the same period last year.
Sales in Saudi Arabia were up seven per cent, while in Egypt they soared by a remarkable 64 per cent.
The sharp rise in the gold price, which briefly touched record levels above $1,000/oz in mid-March, was a key factor behind movements in demand. Though the value of sales rose, the tonnage traded fell compared with the first quarter of 2007, by 19 per cent in the UAE, 25 per cent in Saudi Arabia and 30 per cent in other Gulf countries.
A notable exception was Egypt, where the tonnage rose by 15 per cent to reach 18 tonnes. The rise provoked a surge in both jewellery and investment buying due to a widespread belief that the price would rise further.
The high price affected markets worldwide. For example India continued to suffer from the impact of high and volatile prices as demand fell by almost half.
"Despite the shortfall in tonnage in recent months gold's safe-haven and hedging characteristics have been a major attraction to investors during this period of instability, greater inflationary fears and the falling dollar," said Moaz Barakat, Managing Director of the World Gold Council in the Middle East, Turkey and Pakistan.
"In the UAE, the increase in the investment sector was from 1.9 tonnes to 2.3 tonnes in the first quarter compared with the previous year."