Record high gold prices have weighed on sales of the precious metal for jewellery in Dubai, deterring buyers and depressing their value by 14 per cent for 2007, a top industry executive said on Sunday.
"The market was going really well most of the year, but the high prices we started to see in the last quarter drove buyers away," Tawhid Abdullah, managing director of the Dubai Gold and Jewellery Group, told Reuters.
"We saw a 20 per cent drop last month, and in total the fourth quarter was down 30 per cent, but buyers are getting accustomed to the high prices," he said.
The precious metal has risen more than 30 per cent in 2007 amid safe-haven buying due to credit market turmoil and worries about the health of the US economy which sent the dollar to record lows, and record high oil prices.
Spot gold surged to a record just shy of $900 an ounce on Friday as investors poured into the market, driven by uncertainties in financial markets and inflation fears amid signals that aggressive US interest rate cuts may be on the cards.
"It is normal for buyers to stay away from the market when prices are volatile, but 2008 is expected to see a more stable market," Abdullah said.
Dubai is a long-established market for gold bullion and wholesale and retail jewellery, where the trade is fuelled by strong demand from the Arab world and India, the world's number one gold market.
Recent drops in sales value have deepened anxieties among traders that the emirate may lose its lustre as a regional gold hub.
Record high prices have led to a sharp drop in the flow of scrap gold coming onto Dubai in recent weeks as jewellery owners hoped for further prices hikes, industry experts said.
The rally of the precious metal has also frightened consumers in India, which absorbs 30 per cent of global demand.
Tax-free jewellery in the United Arab Emirates' gold souks and shopping malls draws Gulf Arab and Western tourists.
Last year's demand for jewellery and investment in the UAE, a seven-member federation that includes Dubai and Abu Dhabi, increased by almost 12 per cent in volume and 20 per cent in value from the year before as tourism grew, the World Gold Council said last week. (Reuters)
Gold sales down 14%