DUBAI, (Reuters) – Purchases for gold jewellery and investment in Saudi Arabia fell 25 percent to 21 tonnes in the first quarter of 2008, as bullion rallied and hit record above $1,000 an ounce, the World Gold Council said on Wednesday.
But in terms of value, gold sales rose 7 percent to hit $748 million in the first quarter of this year amid global credit squeeze and inflationary pressures, the industry-funded group said in a statement emailed exclusively to Reuters.
“Despite the shortfall in tonnage in the recent months, gold’s safe haven and hedging characteristics have been a major attraction to investors during this period of instability, greater inflationary fears and falling dollar,” Moaz Barakat, managing director of the WGC in the Middle East, Turkey and Pakistan, said in the statement.
“Investors’ interest will remain very strong in the near future … and as the price stabilises, major gold jewellery buying consumers will adapt to a higher floor in the price.”
Gold powered to a record of $1,030.80 an ounce on March 17 on record-high crude oil, fears of inflation and expectations of more rate cuts in the United States, making the metal more attractive as an alternative investment.
Gold has since fallen, but it surged above $920 an ounce on Tuesday, ending near its highest level in almost a month on Tuesday.
Demand in the United Arab Emirates followed a similar pattern to Saudi Arabia, falling 19.3 percent to 24.2 tonnes in the first quarter of 2008.
Value of gold sales in the seven-member federation that includes Dubai, known as the “City of Gold” rose 15.1 percent to $862 million during the same period.
The emirate is a long-established market 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 top gold market.
Western and Gulf Arab tourists — traditionally vigorous buyers of high quality, glitzy heavy jewellery — visit the UAE’s commercial heart to shop for discounted, tax-free luxury goods in huge shopping malls and the gold souk.
Total demand in the Middle East fell 16.4 percent to 70.5 tonnes in the first quarter of the year valued at around $2.5 million, an increase of 19.4 percent.
While demand for investment declined in some countries in the region, investors in Egypt, which once considered gold the skin of the gods, showed strong interest in the precious metal driven by uncertainties in financial markets and rising inflation.
First-quarter demand in the most populous Arab country was up 14.5 percent at 18 tonnes, while sales value surged 63.5 percent to $641, the WGC said.
The once leading world gold buyer is likely to continue seeing double-digit growth in demand for the yellow metal over the next five years as the economy expands and tourism grows, Barakat said in March.
The country’s gold demand was up 12.2 percent at 67.3 tonnes in 2007, while fourth-quarter demand was up 8.8 percent at 17.4 tonnes, making the north African country the best performer in the region.