UAE gold rush to continue despite soaring costs

[sajid]

Dubai: Value of gold sales in the UAE increased by 15 per cent in the first quarter of 2008, a trend expected to continue in the next six months despite increases in the price of the precious metal.

Tawhid Abdullah, managing director of Dubai Gold and Jewellery Group - the industry body - said the momentum in the first quarter, as outlined in a World Gold Council (WGC) report released in May, was set to continue and increase in the next six months. "Gold sales are doing very well. We have seen an increase since last year," he said.

Determinant

According to the WGC report, the sharp rise in the gold price was a key determinant of movements in gold demand in the first quarter. Gold consumption in the UAE dropped from 30 tonnes in the first quarter of 2007 to 24.2 tonnes in the first quarter of 2008.

"It resulted in total demand falling from year-earlier levels by 19 per cent in UAE, 25 per cent in Saudi Arabia and 30 per cent in other Gulf countries. There was a notable exception in Egypt, where gold demand increased 15 per cent to reach a total of 18 tonnes in the first quarter of 2008.

"The rise in gold prices provoked a surge of both jewellery and investment buying in Egypt due to the widespread belief that the price was going to rise further," the report said.

Managing director of he WGC, Moaz Barakat, said in the report that despite the shortfall in tonnage in the past six months, "gold's safe haven and hedging characteristics have been a major attraction to investors".

"We also believe that investor interest will remain very strong in the near future and that as the price stabilises, major gold jewellery buying consumers will adapt to a higher floor in the price," he said.

Abdullah said consumers in the UAE were now "less sensitive" to the volatile gold price.

"Jewellery has become more about lifestyle now than before, so today's consumers are less sensitive to the gold price, jewellery has become about lifestyle, like designer cloths and handbags," he said.

The report added that there were early indications that demand would be "more buoyant" in the second half of 2008 and said it appeared that the demand for 22-carat gold during the Akshaya Thritiya festival was higher than last year.