Investment in gold will continue to see strong growth across the Middle East in 2008 despite record high prices, predicted the managing director of World Gold Council in the Middle East, Turkey and Pakistan.
Moaz Barakat told Emirates Business fluctuating prices will not decrease import levels as investors in the region continue to buy gold as a hedge against a declining dollar and the volatility of international markets.
“There seems to be a surge in investment demand for gold in the world, especially in the UAE. The volatility of gold we are seeing this year will not affect imports, as in 2008 we still see an increase in oil prices and the weak dollar. More people are investing in the metal due to the factors affecting us today,” he said.
Middle Eastern investors are turning away from traditional investments such as shares and looking at putting their money into gold, according to Barakat.
“This year more people have begun investing in gold. They are no longer going to the bourses and shares, they are either investing in real estate or the euro, and now the latest trend is to invest in the precious metal.”
Majority of the increase in investment has been in small bars equal to 50g to 100g, he said, adding that sales of these bars in the UAE for February and March 2008 doubled from sales figures for the same months last year.
He also noted gold investor profiles have changed as the metal becomes more popular. “The average person is now investing in gold, and not just sophisticated investors with advisors. People are starting to put [their money] in gold, they know more about gold investments and even common men are investing. It is a new trend this year.”
Investment in gold, he added, has been driven by a number of factors, including the wild ride for shares on Middle Eastern and international markets, very low interest rates that have reached 2.5 per cent and the decline of the dollar.
“People have realised shares and IPOs will go up and down, so they are now looking around for more reliable investments.”
Ian Macdonald, executive director of Gold at Dubai Multi Commodities Centre agreed with Barakat’s analysis and said he expects both imports and prices to continue rising.
Gold recently hit the $1,000/oz mark – a 52 per cent rise from last year where the price settled at 655.89/oz. Gold investment reached $8bn in the Middle East, Turkey and Pakistan in the final quarter of last year.
“I see the price making no difference in investments. In fact, investment is increasing. I find it unlikely demand will drop,” said Macdonald.
Gold will fall further
Spot gold is falling as investors liquidate positions in gold after the latest banking writedowns from UBS and Deutsche Bank.
Spot gold had fallen as much as 5.6 per cent from Monday’s high to $887.72 a troy ounce. The rest of the precious metal complex was also lower. Gold could fall further if investors liquidate assets to get cash, a London-based trader said, adding after liquidation gold will rise again amid “flight to quality”.
But at present gold weakness is triggering selling as the metal falls below technical levels.