Record prices scare off Abu Dhabi gold buyers

RECORD PRICES: Abu Dhabi gold sales dropped by 20% in February, Patni said. (Getty Images)

Record prices have frightened gold buyers in Abu Dhabi, depressing the precious metal's sales volume by 20% in February, the Gulf Arab emirate's Gold and Jewellery Group chief said on Sunday.

"Just as the market started to recover in January, prices started to rise again and almost hit $1,000 an ounce, so many buyers stayed away from the market... but in terms of value the market was unchanged," Tushar Patni told newswire Reuters.

"But as we approached March, they started to get accustomed to the new price levels and started to buy gold again as they now expect prices to rise further."

Gold erased initial gains to finish lower on Friday as funds sold bullion for liquidity, capping a volatile week which saw gold make several runs toward $1,000 an ounce but was met with heavy resistance each time.

Spot gold closed at $972.60 an ounce in Europe on Friday.

Prices hit several peaks last year, hitting gold sales in Abu Dhabi. Sales fell 25% in volume and 30% in value.

A surge in oil prices boosted gold's appeal as a hedge against inflation.

The precious metal gained more than 30% in 2007 as safe-haven buying increased due to credit market turmoil and worries about the health of the US economy that sent the dollar to record lows.

"I think many now believe that prices will remain around these levels, so if prices do not go above $1,000 an ounce the market could see a recovery in March," Patni added.

Tax-free jewellery in the UAE gold souks and shopping malls draws Gulf Arab and Western tourists.

Abu Dhabi has 85 gold shops and its own jewellery manufacturers. Imports, however, make up almost 60% of all jewellery sold at retail outlets.

In 2007, gold sales for jewellery and investment in the UAE rose almost 12% in volume and 20% in value from the year before as tourism grew, the World Gold Council has said. (Reuters)

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USER COMMENTS (1 COMMENTS)

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If you think gold is expensive now, wait another year
Posted by Solomon on Sunday 9 March 2008 at 21:13 UAE time

They will double.

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