Commodity Online
DUBAI: Dubai, the biggest bullion market for trading gold in the Middle East, has been hit hard by high prices of the yellow metal. Dubai and other leading cities in the Gulf countries have reported crash in gold sales upto 60% for January, February and March in 2009.
It is not just Dubai, the City of Gold, that has seen bullion markets reeling under recession. Plunging gold sales, volatility in prices and economic meltdown have forced several leading gold and diamond jewelers across Middle East cities to halt all their expansion plans.
”High gold prices and extreme volatility in prices are affecting us very hard these days,” said Joy Alukkas, Chairman of Joyalukkas Group, a leading India-based gold and diamond retail chain with 40 major outlets across the world.
He said the March 2009 earnings of Joyalukkas Group has fallen by 22 percent. “Gold jewellery business is suffering under price fluctuations and sales of gold have drastically across cities in the Gulf countries,” he told Commodity Online.
He said gold sales will begin to rise in the Gulf countries once prices of the yellow metal stabilize.
In the last three months, gold prices have been ranging between $800 and $1,000 a kilogram.
The Joyalukkas Group estimates that gold sales in cities in UAE like Dubai and Bahrain and Qatar have plunged by at least 60% in the last three months of 2009. The jewellery chain that has been opening 12 outlet launches a year since its inception in 1998 has halted all its expansion plans for the next one year.
"We want to consolidate in the next one year. We have committed to five store openings in the UAE, Bahrain, Qatar and India. We will not launch any more stores until this crisis is over and market confidence and spending returns,” Allukas added.
Jewelers like Alukkas pointed out that global financial crisis has badly hit gold sales and bullion markets in the United Arab Emirates (UAE) and Saudi Arabia. Rising unemployment, crash in realty prices and plunging stock markets have taken the sheen out of bullion markets in all the major cities across UAE and the Saudi Kingdom.
While gold sales in UAE cities like Dubai, Abu Dhabi and Sharja have plunged by nearly 60% for the last three months, gold trading volumes have dipped in Saudi Arabia by at least 50% in February.
According to Mark Robison, a bullion analyst based in Dubai, gold sales are falling in the Gulf countries thanks to the effects of recession. “Dubai and other cities in the Gulf have been hit hard by the economic meltdown. Gold sales have plunged here because of the high prices of the yellow metal and price fluctuations,” he told Commodity Online.
Robinson said gold sales in January, February and March have gone down in once glittering business and gold destinations like Dubai and Abu Dhabi mainly because of less tourist arrivals. “Yes, it looks from initial figures that gold sales have plunged by at least 60% percent in Dubai and other cities. If there are no tourists, there are no people to buy gold here,” he said.
Investors use gold as a safe haven in the wake of the depressing economic conditions and investments on other assets. But Robison says the surge in gold prices have ensured that people are losing their purchasing power to buy gold and jewellery items. “The fact is that increasingly people do not have any money to buy gold that is very expensive. That is the main reason for the plunging gold sales across the Middle Eastern countries and nations like India and China,” he added.
Gold sales in Dubai, known as the City of Gold, have always been dependent on tourist arrivals. Leading jewellers said every month the inflow of tourists are going down, leading to a downtrend in gold purchases.
Gold sales in Dubai's traditional jewellery market have collapsed mainly because of the decline in tourist arrivals. Local jewelers who have been waiting for a big chunk of tourists said that less and less tourists inflow to the city has badly affected the sale of the yellow metal.
