UAE gold sales increase by 23 per cent in Q1 2007 hitting Dh2.7b mark

Gold consumption (jewellery and investment) in terms of tonnage in the UAE experienced a 6% increase in the first quarter of 2007 compared to the same period of 2006. Gold consumption in terms of tonnage in the UAE was 28.1 in the first quarter of 2006 and rose to 29.7 in the first quarter of 2007 contributing to 6% increase.

The first quarter of 2007 started well with excellent off take from the highly successful Dubai Shopping Festival running from December 20, 2006 to February 2, 2007.

The festival witnessed record sales by participating jewellers that were 25% higher than the successful festival held two years back. The improved performance from year to year during the same period last year was scaled down due to the mourning period announced by the Government of Dubai as a result of the death of the late Ruler of Dubai, Sheikh Maktoum bin Rashid Al Maktoum, in the first quarter of 2006 which is the same period when the Dubai Shopping Festival usually takes place.

During the rest of the first quarter, the vibrant UAE economy and strong tourist growth continued to boost demand and consumers, as in other price sensitive markets, are becoming used to higher gold prices and expecting them to rise further. Last year's collapse in the stock market has reduced the attractiveness of shares while the real estate boom is showing signs of slowing down. Both these developments have freed consumer income for items such as gold and have encouraged merchants, including those owning gold businesses, to channel investment towards developing their traditional activities.

Consumers are also now accustomed to high gold prices and a growing consensus that the price of gold could rise further. The small retreats in the gold prices from time to time were seen as a strong buying opportunity.

Commenting on the first quarter of 2007 results, Moaz Barakat, Managing Director of the World Gold Council in the Middle East, Turkey and Pakistan said: 'The positive effect of the marketing and promotional campaigns held by the World Gold Council and its partners from gold traders in several countries of the region have been very much apparent on gold jewellery demand.'

'It is worth mentioning, too, that consumers continued to buy gold jewellery of lower weights and paying higher prices because of their belief in the importance of gold and gold jewellery in their lives. Such conviction is backed by the increasing interest in gold from long-term investors regionally and worldwide, who have added gold to their investment portfolios aiming at balanced diversification and returns. Moreover, gold jewellery sales are expected to increase in the second quarter of the current year.'

Barakat added in general, the outlook for the second quarter is very positive with good jewellery demand in most of the key markets.

Overall demand in the Middle East region (Saudi Arabia, UAE, other Gulf States and Egypt) was 8% higher in the first quarter than a year earlier in terms of tonnage (26% higher in terms of dollar). A number of common factors are supporting gold demand in the region. As consumers are accustomed to higher prices, the gold pricing levels have become less of a deterrent. Price dips have become a good buying opportunity. Continued high oil prices (compared to the levels of 2004 and earlier) have contributed to booming economies.

Tourism levels in 2007 have so far been good while sustained promotion and increasing good product offering is also stimulating demand. Against this, demand per head in Saudi Arabia and the Gulf region is already high compared to other countries while competition, both from other forms of jewellery and lifestyle products, is increasing. Currencies in Saudi Arabia and the Gulf countries are tied to the US dollar so these countries saw the full impact of rise in dollar price against gold.