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Mon 25 Jan 2010 11:39 PM

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Dubai gold trade hit by Asian workers going home

Leading Indian exec said that the jobs lost during the economic crisis impacted gold sales.

Laid off South Asian workers returning home have robbed the Dubai retail gold market of some of its keenest buyers, while sales in India have held up better, a leading Indian executive in the trade told Reuters.

In an interview, Vasant Mehta, chairman, Gem & Jewellery Export Promotion Council, Mumbai, said: "Thousands of jobs were lost and that this directly had an impact on the volume of gold sales in Dubai."

Mehta added: "There were so many Indians and Pakistanis who were laid off during the economic crisis and many of these workers used to buy gold from Dubai to send home to their families and that's why the drop in UAE gold sales was worse than India."

Jewellery sales in Dubai, dubbed the city of gold, have continuously declined since the end of 2008, as disposable incomes have fallen due to the global downturn.

The repercussions of the economic crisis coupled with Dubai's debt saga have shaken global investors and lead to a standstill at many of the emirate's construction projects - reliant on workers from the sub continent.

The sales slide continued last year as gold hit a record high of $1,226.10 per ounce on Dec 3, taking the precious metal further out of reach for cash strapped consumers.

Spot gold prices reached around $1093.65 an ounce on Monday, however Mehta expects prices to dip below the $1000 mark only if India and China's central banks decide not to buy more reserves.

He said: "Four months ago India's central bank bought 200 tonnes of gold which hyped up prices and now there are rumors of another 200 tonnes order in addition to China wanting to buy more reserves."

Despite a slow six months of sales following the economic crisis, India's retail gold sale volumes grew by two percent in 2009 compared to a year earlier, said Mehta.

He said: "One of the things that really helped contain the losses in the jewellery sector is the fact that India curtailed production right away of the jewellery being made and until now we are only operating at around 75 percent of what we used to produce prior the crisis."

This year jewellery sales in India were expected to grow by four to five percent, said Mehta.

He added: "Like the Middle East, gold in India is part of our tradition and there isn't a year that goes by without at least the purchase of one item - that's why this sector will remain vibrant." (Reuters)

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