Despite gold prices climbing to record highs in recent months, sales of the yellow metal in the UAE are unlikely to be adversely affected for long because of sheer demand from Asian buyers. The normally bustling streets of Dubai’s world-famous Gold Souq market are not so busy nowadays, though customers do trickle in hoping for bargains. Shopkeepers say that there has been a 30 per cent drop in sales ever since prices skyrocketed recently — reaching nearly 80 dirhams (around $22) per gram about two months ago.

Gold and silver jewellery is the third biggest contributor to the UAE economy, after construction and petroleum. Due to the rise in gold prices, consumption in the UAE in terms of tonnage declined by 17 per cent from 33 tonnes in the first quarter of 2005 to 28 tonnes during 2006. Consumer demand was also affected at the annual Dubai Shopping Festival, a key event for gold sales, which was scaled down following the death of the Dubai’s ruler, Sheikh Maktoum bin Rashid Al Maktoum, in January.

Analysts attribute the increase in gold prices to high crude oil prices, geopolitical tensions, inflation, and the increasing use of gold as hedge funds against inflation and innovations in products, and markets for trading and investment.

A survey conducted by Sarwat Abdul Razzak, director of Dubai’s ARY gold and jewellery firm, has shown that shoppers in the UAE spend, on average, 30 times more on gold than in the rest of the world. South Asians constitute an overwhelming 70 per cent of buyers, followed by East Asians with 22 per cent. Arab and European consumers make up four per cent each.

Some five million Indians work in the Middle East countries and each time they fly home they are certain to carry along some gold. With increasing affluence and lowering of customs duties, Indians have been flying to Dubai in increasing numbers just to buy gold jewellery in a market where caratage is assured.

A few jewellery makers, however, said that they were facing closure. ‘’Customers are not buying as much as before — at the same time our overheads and other costs have risen sharply in the past couple of years. If this situation continues, I may have to shut down and send more employees home,’’ said Nitin Shah, a dealer from India’s western Gujarat. Others were more optimistic. ‘’There are people who wait and watch and then buy according to prices and there are those who have to buy depending on the occasion and irrespective of the price,’’ said Yousuf Ismail, a Sharjah gold dealer. “Also, while jewellery sales are falling, sales of bars have been steady. Gold bars are usually bought as a form of investment irrespective of the price as they feel even at high prices gold is a good buy.’’

According to the Gold Fields Mines Survey, the British industry watchdog, consumption of gold continues to rise in both global and regional markets despite high prices. Dubai imported 525 tonnes of bullion worth $10.5 billion last year, which is projected to double in five years. — IPS