DUBAI (Reuters) – Record prices have frightened gold buyers in Abu Dhabi, depressing the precious metal’s sales volume by 20 percent in February, the Gulf Arab emirate’s Gold and Jewellery Group chief said on Sunday.

“Just as the market started to recover in January, prices started to rise again and almost hit $1,000 an ounce, so many buyers stayed away from the market…but in terms of value the market was unchanged,” Tushar Patni told Reuters.

“But as we approached March, they started to get accustomed to the new price levels and started to buy gold again as they now expect prices to rise further.”

Gold erased initial gains to finish lower on Friday as funds sold bullion for liquidity, capping a volatile week which saw gold make several runs toward $1,000 an ounce but was met with heavy resistance each time.

Spot gold closed at $972.60 an ounce in Europe on Friday.

Prices hit several peaks last year, hitting gold sales in Abu Dhabi. Sales fell 25 percent in volume and 30 percent in value.

A surge in oil prices boosted gold’s appeal as a hedge against inflation.

The precious metal gained more than 30 percent in 2007 as safe-haven buying increased due to credit market turmoil and worries about the health of the U.S. economy that sent the dollar to record lows.

“I think many now believe that prices will remain around these levels, so if prices do not go above $1,000 an ounce the market could see a recovery in March,” Patni added.

Tax-free jewellery in the United Arab Emirates’ (UAE) gold souks and shopping malls draws Gulf Arab and Western tourists.

Abu Dhabi has 85 gold shops and its own jewellery manufacturers. Imports, however, make up almost 60 percent of all jewellery sold at retail outlets.

In 2007, gold sales for jewellery and investment in the UAE, a seven-member federation that also includes Dubai, rose almost 12 percent in volume and 20 percent in value from the year before as tourism grew, the World Gold Council has said.