All that glitters is not gold. By the same token, all new jewelry is not necessarily new. This inference is applicable in a market where there is always a high demand for the commodity despite the fact that the price of gold is rising at an exponential rate. Gold prices jumped more than $20 on Thursday in the international market after the dollar weakened and crude oil spiked - inflationary moves that boosted demand for safe, alternative investments. Gold for December delivery jumped $22.70 to settle at $839 an ounce on the New York Mercantile Exchange. In Saudi Arabia, jewelers said that old jewelry or out-of-style ones that were not sold are being melted and minted again to a new and fashionable piece of jewelry. According to the World Gold Council (WGC), Saudi Arabia sells between 20 and 30 tons of scrap, or resold jewelry, per quarter to domestic and regional refineries. Umrah season, wedding preparations and domestic tourism have influenced the increase in sales of jewelry in the Kingdom. “We are glad as summer season brought a good business for us”, said Muhammad Al-Bander, a retailer of Al-Rumizan Gold shop in Al-Yamamah market of Jeddah. “Saudi Arabia could be facing a supply dilemma as potential retailers of scrap gold hold tight in expectation of further price rises,'' he added. WGC regional office in Dubai said the Saudi gold sales value rose up to SR4.84 billion in the second quarter of 2008, contributing to a 14 percent increase in comparison with the same period of 2007, despite the 15 percent decrease in tonnage. The demand for gold in the Gulf region as a whole increased 20 percent in UAE and 2 percent in other Gulf countries in value. Additionally, Egypt witnessed an astounding sales increase of 48 percent. Early indications suggested that the demand in the second quarter of 2008 will surpass that in the first quarter due to summer holidays, wedding and gift seasons. “As the gold prices shoots up, we had virtually stopped exporting scrap gold and melt down the old jewelry into a solid bar, often a kilogram in weight to make a new jewelry”, said Abdul Ghani, a sales manager in Mazhar Jewelry, a retail jewelry shop in Mehmood Saeed Mall. “Actually women consumers in Saudi market are fashion conscious and they demand for new designs. Since this is the peak season, we are providing the newest styles and designs by melting down the old designs,” said Ghani, adding that “the low level of gold resale is a sign that the industry is flourishing.” The WGC report said the high and volatile gold price continued to dampen demand in tonnage terms during Q2, particularly for jewelry. While the average gold price, at $896.29/oz, was well below the peak of $1,011/oz seen in mid-March, it nevertheless represented a 34 percent rise on the average price of Q2 2007. Total identifiable demand fell 11 percent in UAE and 24 percent in other Gulf countries. “The surge in gold price affected markets worldwide. India was the biggest contributor to the fall in gold demand during Q2, as it was in the first quarter. Both jewelry and investment demand were severely affected by the high and volatile gold price and higher local inflation, which has squeezed disposable incomes”, said the WGC report adding that “jewelry demand in Q2 was down 47 percent in tonnage terms on the levels of a year earlier, while net retail investment fell 41 percent. Indian demand also fell by 29 percent in jewelry and 20 percent in investment.” “The performance in Q3 2008 will improve in comparison with Q3 2007, especially in the city of Jeddah … which is promoted as the gate of gold in the region by the World Gold Counci,” said Bisher Diab, Gulf Region consultant and Saudi market general manager in WGC. “The strength of Saudi economy, the increasing trust of end-consumers in purchasing gold jewelry will encourage the demand for more gold jewelry,” he added. __
