By Joanna Hartley
Increased investment in gold mirrors a global trend sparked by current economic uncertainty.
The net retail invetment in gold rose by 136 percent across the Middle East last yearin line with a global rise, as a result of the current economic crisis and uncertainty over future recession and inflation.Total gold demand in the Middle East in Q4 of 2008 was up one percent on the same period in 2007, but sales were directed at coins and bullion rather than traditional gold jewellery, according to figures released by the World Gold Council's regional office in Dubai.
Surge in investment demand was reasonably widespread across the region. Saudi Arabia saw a 300 percent rise, Egypt a 67 percent increase and the UAE a 38 percent hike, compared with Q4 2007.
The move matched international trends that saw the reawakening of investor interest in the holding of physical gold, the council said.
Worldwide demand for bars and coins rose 87 percent over the year, with shortages reported across many parts of the globe that forced prices higher.
However, sales in gold jewllery, which traditionally makes up 90 percent of investment in teh Middle East region, fell by seven percent, said the WAM news agency.
It was the resilience of Egypt, where demand for gold jewllery rose 12 percent, that largely offset weakness in the UAE, which was down four percent, Saudi Arabia, down four percent and other Gulf countries that were down 13 percent, the council said. .
However, teh UAE saw growth on gold jewellery sales of 17 percent on the last quarter of 2008 - put down to the annual Diwali fesitval.
"In the UAE, demand during October's Diwali festival was particularly strong with the help of lower, more stable gold price during that time,” according to Lama Al Saheb, head of marketing and PR for the World Gold Council ME region.
“Notably, net retail investment was up by 38 percent. Demand for gold coins and low production cost 22K gold jewellery such as bangles and chains absorbed the benefits of the excess demand,” he said.
Marketing and promotional gold jewellery campaigns would be more important now than ever to maintain a healthy gold market, he added.
However, internationally jewellery demand was up 11 percent in dollar terms at almost $60bn for the whole year, but down 11 percent in tonnage terms at 2,138 tonnes.
This resilient spending on gold jewellery indicated the strength of underlying demand, teh council said.
Aram Shishmanian, the new CEO of the World Gold Council said: "These figures confirm that investors around the world recognise the benefits of holding gold during this time of unprecedented global financial crisis, recession and the spectre of future inflation.
Gold has again proven its core investment qualities as a store of value, safe haven and portfolio diversifier and this has struck a chord with nervous investors,” he added.