Saudi gold demand jumps 30%

The World Gold Council (WGC) said on Sunday that Saudi Arabia's gold demand rose at a faster clip than its preliminary estimate in the second quarter, jumping 30.4 % on the year earlier period.

"The Saudi market saw a very strong recovery in the second quarter," Moaz Barakat, managing director of the WGC in the Middle East, Turkey and Pakistan told Reuters.

"Gold prices were less volatile and the euphoria of the stock market and selling gold to invest in stocks cooled off."

Barakat said he expected to see strong demand from Saudi Arabia, the Gulf's largest market, to continue through the third quarter.

Gold came back into favour with Gulf Arab investors after four of the seven Gulf Arab stock benchmarks dropped more than 35 % last year, resulting in a capitalisation loss of about $500 billion since February 2006. Analysts say much capital has left the bourses for other asset classes.

Gold demand in Saudi Arabia rose to 42.5 tonnes in the second quarter of 2007 from 32.6 tonnes the year earlier, Barakat said.

The WGC's preliminary estimate for Saudi demand for the second quarter was for a lower volume rise on the year at 17 %.

Total demand in the Middle East rose 20 % to 97.5 tonnes on the year in the second quarter as consumers preferred jewellery to shares, Moaz said.

Second-quarter gold demand in the United Arab Emirates increased by 14.6 % to 29.8 tonnes in the same period, Barakat said.

Demand in Egypt, the most populous Arab country, was up 9 % at 13.3 tonnes, boosted by growing tourism and a stronger economy, the WGC said in a report on Sunday.

The region's economies grew about seven % in 2006 as high oil prices fuelled rapid expansion, bringing with it increasing appetite for luxury items.

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