08 June 2006

JEDDAH: While it is still too early to say what effect near record-high gold prices are having on traders and dealers in the Kingdom, retailers tell The Saudi Gazette the sales are brisk, despite gold prices reaching their highest levels in the last 26 years.

According to a report by the World Gold Council, demand in the Middle East and worldwide remained high during the first three months of 2006, with institutional investors and jewelry buyers continuing to buy despite the high costs.

"How can anyone skip buying jewelry when it is the peak season for occasions and wedding ceremonies?" asked jeweler and goldsmith Adnan M. Awad, adding that the rumors that gold will soon fall are "just rumors."

The price doesn't matter for the consumer when the "need to buy gold" is there, Awad said.

However, Awad said that demand in Saudi Arabia fell by 30 percent after the stock market crash. "It affected both consumer sentiment and the purchasing power of individuals," he explained.

Ziaulhaq Choudhry of Harbi Jewelers said that long-term investors and funds are becoming more interested in gold, and are diversifying their portfolios with gold holdings.

"High gold prices also led many individuals to sell part of their gold savings and gold investments [bars, coins and gold jewelry] to make high profits resulted from high gold prices," Choudhry said.

According to Sultan Waheed of the Jeddah Chamber of Commerce and Industry (JCCI), worldwide gold demand fell by 16 percent in the last quarter of 2005 but recovered earlier this year.

"As far as the analytical approach, we used to think that gold and petrol prices vary accordingly. But here is a very unusual case that tells us that we cant beat the market through increase or decrease in the prices of gold and petrol," Waheed said.

By Sabahat F. Siddiqi

The Saudi Gazette 2006