JEDDAH: Unstable and record high gold prices are forcing many investors in the industry to diversify their investments and a favorite alternative is the Kingdom's booming real estate market. According to Fahad a shopkeeper at the Al-Yamama gold souk in South Jeddah, many owners are reducing the amount of gold they keep in their shops and shifting their attention to real estate investments.
"The owner of the shop has reduced the number of workers here from five to three and is investing in constructing new apartment buildings, which unlike gold, sell very quickly," said Fahad.
According to another shopkeeper, silver is now in high demand as it is more affordable. Khamis, who until recently worked in a gold shop, said his sponsor sold all of his gold stock and now exclusively deals with silver. One gram of silver can sell between SR113 to SR125 depending on the quality and craftsmanship.
An official at the Jeddah Chamber of Commerce and Industry acknowledged the trend but said that not all gold investors are shifting to real estate or precious metals and many are just diversifying their investments. The official said now is the best time to buy gold as its current price of SR5,904 per ounce is far less than its high of SR6,750 in Nov. 2011. However, citing deteriorating economic conditions in European markets, he said, gold prices are expected to rise again in the first quarter of 2012.
Abdul Hamid Ali, a shopkeeper in the Al-Balad area of downtown Jeddah famous for its gold shops, said despite high prices people were coming to buy gold. "Spring break is approaching and people are interested in gold again thanks to the slight decrease in prices."
However, Jamil Farsi a major jewelry investor in the Kingdom also said that low gold prices or consumer interest would not last for long. "In 2009, an ounce cost $972. This number jumped to $1,225 in 2010 and reached $1,580 this week."
Talking about investment in gold, Farsi said that in 2006, 66 percent of gold was used in jewelry, 14 percent in industry and 12 for investment. In 2009, this percentage changed leaving only 50 percent in use for jewelry, 11 percent for industry and 20 percent for investments.
Investors in the Kingdom's gold market recently agreed to reduce the exchange of used gold to combat counterfeit gold, which has been blamed for contributing to the fluctuation of prices.
The agreement obliges gold shops not to buy gold from individuals unless it has been tested.
There are 6,000 gold shops in the Kingdom, 250 small production factories and 700 small repair factories.
© Arab News 2012
