The retail gold jewellery sales increased from AED 5.1 billion in the year 2004 to AED 6.2 billion in 2004 contributing to the 21% increase.
In terms of tonnage, the UAE gold consumption (jewellery + investment) increased from 96 tonnes in 2004 to 106 tonnes in 2005. This 10% increase in gold jewellery consumption places the UAE as one of the top ten gold consuming countries in the world. The United Arab Emirates is not only considered as one of the most consuming countries of gold, it is also the second import destination of Italian and Turkish gold jewellery after the United States.
This remarkable performance was not only restricted to the UAE’s gold market, but also on the rest of the Gulf as well. The gold consumption in Saudi Arabia increased by 13% from 141 tonnes in 2004 to 160 tonnes in 2005. The rest of the Gulf’s gold consumption increased as well by 4% from 50 tonnes in 2004 to 52 tonnes in 2005.
Moaz Barakat, Managing Director of the World Gold Council in the Middle East, Turkey and Pakistan commented on the increased gold consumption in the UAE and the rest of the Gulf despite the increase in gold price over the year saying “the upward trend in the price does not seem to have deterred jewellery purchasers. Indeed, reports from the main consuming markets indicate that buyers are now accustomed to price in excess of $500 per ounce, and that demonstrated the high affinity to consumers toward gold and gold jewellery.”
Barakat added on the importance of maintained promotional spending needed to ensure that demand will continue to rise. Sustained promotions of gold jewellery in key markets has driven up the demand for gold like the promotional activities run by the Dubai Gold and Jewellery Group and the Gold Trade in the country in addition to the shopping festivals (Dubai Shopping Festival and Dubai Summer Surprises).
Another factor that contributed to the improved performance in the gold market is the increase of tourists during the holiday seasons in the UAE where 70% of the UAE tourists visit the gold souk.
In addition to the UAE Government’s efforts to promote the country, the Dubai Metals and Commodities Centre has further enhanced Dubai’s images as the City of Gold through establishing a free zone that made Dubai a hub to gold and other precious metals manufacturing and trading. The year 2005 witnessed an increase in jewellery manufacturing that is based mainly in the Dubai Metals and Commodities Centre.
The region also witnessed a good gold demand due to the introduction of gold shopping festivals in countries like Kuwait and Bahrain that boosted the off-take of gold.
A weak dollar and an uncertain geopolitical situation in the Middle East have added to the glitter of gold, which has seen its volume and value increase in 2005. Moreover, high oil prices have resulted in excess liquidity in the region, with gold being a major investment beneficiary besides local stock markets and real estate.
UAE Investment demand in gold witnessed a 53% increase in 2005 compared to 2004 as gold investment increased from 6.5 tonnes in 2004 to 10 tonnes in 2005 as continued interest in gold purchasing was offset by profit-taking by some large institutional investors.
“One may wonder with such astonishing gains if it is too late for investors to get a piece of the action. We at the World Gold Council think not. In fact, we believe there is still a long way to go before this gold bull has run its course and that the best is yet to come” Barakat concluded.
Despite the increase in gold price, the economic and political concerns only had a positive impact on the gold market that increased the retail investment purchases. The investment in gold as a financial asset has increased in-line with the global trend. Early indications for the year 2006 throughout the region are for further strong growth.
Monday, February 27- 2006 @ 15:30 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.