UAE gold demand drops 33% as tourists decline

Middle East sees 57 per cent drop in investments in the yellow metal. GCC highly elastic to gold price rise and needs more gold products. (REUTERS)

Demand for gold in the UAE dropped 33 per cent in 2009 year-on-year due to decline in tourists, a senior World Gold Council (WGC) official said yesterday.

Demand for gold fell to 73.9 tonnes in 2009 from 109.5 tonnes in the previous year, WGC figures showed.

In terms of US dollars, the demand for gold in the UAE dropped from $3.07 billion (Dh11.27bn) in 2008 to $2.29bn this year.

Blaming the lack of tourists as the prime reason for the decline in demand for gold, WGC Managing Director for Middle East and Turkey Anan Fakhreddin said though the country and the GCC as a region are the largest per-capita consumer of gold in the world, they remain highly elastic to price rise.

In 2009, gold prices went up by 12 per cent. The bullion was priced at $1,119.37 an ounce yesterday having risen 0.04 per cent from the previous day's close.

Fakhreddin said the gold investment products remain largely absent from the region and there are no other products than the Nasdaq Dubai-listed Dubai Gold Security (DGS) that allows a direct exposure to gold.

"We need more (gold) investment products in the GCC," he said. In contrast, globally the demand in gold ETFs alone rose 85 per cent in 2009 and stood at 594.7 tonnes, having crossed the $17bn mark. The drop in jewellery demand in the UAE stood at 32 per cent in the last quarter of 2009 as compared to the same quarter of 2008, Fakhreddin noted.

In terms of investments, there was a 57 per cent drop in the Middle East – a region that the WGC identifies as the GCC, Egypt and Turkey; even though, globally, in terms of investments, the figure went up by seven per cent. Fakhreddin said the WGC plans to launch two products in the region in a month's time – one in the UAE and the other in Saudi Arabia – that would allow a direct exposure to gold.

"We plans to launch these products by mid-March along with our partners," he said without identifying the partners.

Besides, in two weeks time, the council also plans to launch a promotion campaign worth $4.5 million across the GCC along with jewellers such as UAE-based Damas and Saudi Arabia's Taiba to boost demand for retail jewellery. The WGC has also commissioned a study to understand the potential of the region in terms of gold investments, Fakhreddin said.

Though gold was repeatedly mentioned as a hedge against the falling dollar and there were repeated forecasts by analysts in Middle East of large-scale investments flowing into the yellow metal, the WGC figures pertaining to tonnage off-take, investments and demand for jewellery all reported sharp declines in the region. The declines were particularly sharp in the last quarter of 2009, a festive season when all communities are known to buy gold. Fakhreddin blamed the sharp rise in prices in the quarter for the decline in demand.

"Relative to the Q4 2008, Middle Eastern demand in the last quarter declined 32 per cent. Jewellery demand, which fell 29 per cent, suffered to a lesser extent than net retail investment, though the jewellery demand was nevertheless worse than a global average of eight percent," a WGC report said.

"The UAE and other Gulf countries recorded the largest declines of 33 per cent and 31 per cent (in terms of tonnage off-take) respectively, with Egypt and Saudi Arabia being somewhat lower but still slightly worse than the global average of 25 per cent and 24 per cent respectively."

"Egypt and the UAE suffered the most severe declines in jewellery demand in Q4 – down 35 per cent and 32 per cent respectively on the levels of Q4 2008," the WGC added.

However, the figures in terms of dollars remained healthy both globally and in the Middle East, the WGC noted. In 2009, the total global dollar demand for gold remained above the $100bn for the second year in succession. The UAE spent $2.98bn on gold the last year, a figure that Fakhreddin said was "extremely healthy". Turkey and Saudi Arabia ($3.76bn) reported a higher consumption than the UAE in terms of dollars.

 

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