Gold jewelry sales in Dubai fell around 30 percent in August, compared with a year earlier, while sales in Abu Dhabi, the capital of the UAE, dropped by 40 percent, the worst sales this year, as high gold prices and the economic downturn deterred buyers, Reuters reported citing retailers in both cities. Gold retailers are seeing sale volumes drop as prices of the metal are boosted by institutional funds seeking a safe haven for their assets during the global economic slowdown. “Our sales in August have dropped by around 30 percent from last year because the price of gold is too high for (retail) consumers during this crisis,” said Sanjay Brahatti , co-owner of Al Khaledyah Jewelry told Reuters, which is based in Dubai's old gold souk and has five branches. “And if things continue like this over the coming two months, we are thinking about cutting down the number of branches to ease costs,” he said. Gold has risen by more than a quarter to about $990 an ounce on Thursday from a low of $773.90 in August last year. In October it dipped to a one-year low of $680.80. A decline in the numbers of tourists visiting Dubai had also contributed to the fall in sales, as they make up a large part of demand. “There are far less tourists this year compared to last year and this, with the high gold prices, has really hit business bad,” said Hassan Salah, account manager at Kaloti Jewelry, a retail gold wholesaler in Dubai. Improved demand is expected during November and December, said a sales manager at Sparkling Ambience Jewelry at the Dubai Mall. “Things are really bad now, but hopefully with the Christmas holiday season coming up, people will start buying jewelry as gifts,” he said. The average price of 22 carat gold in August was AED107 ($29.15) a gram compared with AED82 ($22.34) in August last year and AED105 ($28.61) in July this year. “The market was very bad last month, almost 40 percent down. It is always like this because it is holiday month with no buyers,” Tushar Patni, director of Ajanta Jewelers in Abu Dhabi told the news provider. “Gold prices were also higher and usually during Ramadan we see less buying. Last year was an exception because in August prices were really low,” he said. Sales are expected to be flat in September if prices continue to be on the high side said Patni. Price of gold touched AED110 ($29.97) a gram on Thursday. Total demand for gold in the UAE dropped 19 percent in the second quarter of 2009 compared with a 31 percent fall in the first quarter, according to the World Gold Council (WGC). Total demand for gold in the Middle East region fell by 18 percent in the second quarter to 72 tons (total demand was up 33 percent on the previous quarter). The investment component of demand fell 31 percent to 3.8 tons, while jewelry off-take was 17 percent below Q2 2008 levels at 68 tons (demand for jewelry was up 37 percent on the previous quarter, but this was to a significant extent a seasonal improvement). The UAE saw the biggest decline in the Gulf, at 19 percent, compared with a 17 percent drop in demand in Saudi Arabia. Gold demand for jewelry and investment in the UAE in the second quarter was 21.5 tons, down from 26.6 tons in the same period last year. Rozanna Wozniak, investment research manager at the WGC, said that gold is finding favour in the Middle East, mainly due to its strong performance during the global financial crisis. “We are starting to notice a trend whereby the volume of gold investments in rising in the Middle East and with time we believe it will balance out with retail demand,” she told Reuters. “Unlike other commodities, gold had managed to hold its value during these difficult financial times and returns on investment were also positive.” “Despite softness in the gold jewelry segment in the second quarter of 2009, the investment demand category for gold has remained robust and continues to attract capital flows. On the back of continued investor appetite for a tactical allocation towards the commodity, second quarter investment demand for bullion actually rose to 222 metric tonnes, an increase of 46 percent on year-earlier levels,” said Sameer Meralli the Managing Director of Dubai Gold Securities, the Nasdaq-Dubai traded ETF. Dubai's gold markets and shopping malls are long-established markets for gold bullion and wholesale and retail jewellery, where the trade is fuelled by strong demand from the Arab world and India, the world's number one gold market, and western tourists. Nearly 90 percent of total consumer offtake in the region is in the form of jewelry. Weakness in this sector which was down 7 percent largely offset strong growth of 139 percent in the net retail investment according to WGC data for 2008. In Middle East gold retail, consumers make up traditionally, more of the market than investors and rather than buying gold, cash-strapped consumers are selling it. But this trend is shifting as the economic crisis is changing the UAE gold market patterns, with individual investors buying gold for investment purposes, partly compensating for lower consumption from retail demand.
