Record high gold prices dampened Dubai's gold sales in February, depressing volume by about 15 percent from a year-ago, a top industry executive said on Tuesday. Dubai, the Gulf trade and business hub, is a traditional market for gold bullion and jewellery, meeting strong demand from the Arab world and India, the world's main gold market.
"Relatively speaking, the 15 percent drop we saw last month is not bad, especially that prices are now above $1,000 an ounce," Tawhid Abdullah, managing director of the Dubai Gold and Jewellery Group, an industry association, told Reuters.
"The market is okay now, and overall, diamond jewellery sales are compensating for the drop in gold jewellery," he said in an interview. Gold, seen as a hedge against the weak US dollar, has gained more than 23 percent this year on bets of rising inflation amid deepening US financial concerns that were weakening the greenback against other currencies.
The precious metal steadied at around $1,000 an ounce ahead of the US Federal Reserve's meeting on interest rates on Tuesday, but investors and speculators were still keen to book profits after pushing up the price to record highs. Traders had hoped gold jewellery retail demand would be upbeat if prices drop below $900 an ounce.
Dubai, one of seven members of the United Arab Emirates (UAE) federation, saw the volume of gold sales in the fourth quarter drop 30 percent on the year as high and volatile prices scared many buyers, Abdullah has said. In the UAE capital Abu Dhabi, a much smaller market than Dubai, record prices have frightened gold buyers, depressing the precious metal sales volume by 20 percent in February, the emirate's Gold and Jewellery Group chief has said.
Tax-free jewellery in the UAE gold souks and shopping malls have traditionally drawn Gulf Arab and Western tourists but high prices, which hit demand in India and Italy, took their toll on Dubai's gold market.
UAE's full-year 2007 gold demand rose 8 percent to 99.8 tonnes, but it fell 8.1 percent to 19.3 tonnes in the fourth quarter, the World Gold Council (WGC) has said. Value of gold sales in the UAE rose 23.8 percent to $2.6 billion in 2007. Fourth-quarter sales value reached $516 million, almost 6 percent increase from the same period a year earlier, it added.
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