UAE gold sales increase by 15% in the first quarter of 2008

The same positive sales value increase was recorded in KSA as gold sales increased by 7%. Additionally, Egypt witnessed an astounding sales increase of 64%.

The sharp rise in the gold price, which briefly touched record levels above $1,000/oz in mid-March, was a key determinant of movements in gold demand in the first quarter.

It resulted in total demand falling from year-earlier levels by 19% in UAE, 25% in KSA and 30% in other Gulf countries.

There was a notable exception in Egypt, where gold demand increased 15% to reach a total of 18.0 tonnes in Q1 of 2008.

The rise in the gold price 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 below table demonstrates the Q1 gold consumption figures for the jewellery and investment sectors for the year 2008 compared to 2007.

The surge in gold price affected markets worldwide. India for example, which is the largest market for gold and also the most price sensitive, continued to suffer from the impact of high and volatile prices as gold demand dropped by almost half the levels of Q1 of 2007.

Commenting on the Middle East market performance, Moaz Barakat - Managing Director of the World Gold Council in the Middle East, Turkey and Pakistan said:

"Despite the shortfall in tonnage in the recent months, gold's safe haven and hedging characteristics have been a major attraction to investors during this period of instability, greater inflationary fears and falling dollar. In the UAE the increase in the investment sector was from 1.9 tonnes to 2.3 tonnes in Q1 of this year compared to the previous year contributing to a 22% increase. 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."

A minor factor also affecting the year on year comparison was the evolution of the Islamic calendar which meant that the beginning of 2007 benefited from the gold buying associated with the Hajj season and Eid al Adha, whereas 2008 did not.

Early indications are that demand in Q2 will be more buoyant than in the first quarter. It also appears that demand for 22-carat gold during the Akshaya Thritiya festival was higher than last year.

Provided prices do not rise sharply again, this suggests prospects for the wedding season, which starts in May.