By Shane McGinley
UAE hardest hit in region as demand for the precious metal drops 39%.
If the slump in demand for gold does not improve in Dubai the closure of some of the city’s legendary jewellers is ‘inevitable’, according to a new report by the World Gold Council.
In the third quarter of 2009, the global demand for gold has dropped 34 percent, according to the World Gold Council (WGC).
However, the UAE was one of the hardest hit regions in the Middle East, with demand for gold jewellery dropping 39 percent in the third quarter year-on-year.
Demand for gold for investment declined even further, down 52 percent.
“The weak result for the latest quarter reflected the combination of the very high gold price, reduced tourist inflows, fewer expatriate workers (in particular workers from India) and the flow-on effects of the property downturn,” the WGC report said.
The report found that the Dubai market was “under pressure” as many of the emirate’s jewellers invested their profits in the property sector, which has declined by nearly 50 percent in the last year.
“Left with cashflow problems, jewellery retailers have been forced to liquidate inventories to meet margin calls and make repayments on gold loans. As yet, there have not been any notable closures of jewellers, but this is probably inevitable if demand conditions do not improve,” the report forecast.
Gold is losing its sheen (among Indians who are the biggest customers) mainly due to the high prices which are kind of imposed by speculative activities in the world gold market. Where is the actual demand to justify this steep increase in prices? One wonders why the price of oil went all the way upto USD 140 and is now back at USD 80? It is all the greed (for huger bonuses) and speculation which is driving the prices to such high levels which are unreachable for common man? At grassroot level(people whose favorite subject is not macroeconomics), all this is just greed of some so called wise financial sector greedy employees & their rich clients who want to multiply and triple their huge wealth.
First of all,there was never a need for so many jewellery stores in Dubai...back then, banks were very generous, lending money left right and centre...malls were opening, left right and centre...and in all the madness, we completely forgot the crucial issue...where are the buyers???...hence, the reality is now sinking in...it is high time that 50% of the stores close down...after all, most probably,we have more jewellery stores in Dubai then Laundries!!
In this difficult times we need to sustain some pain but in the long run this place will be one of the best places in the world as We have state of the art infrastructure and We are regional HUB. We have to start looking beyond the short term and have a long term view with is buoyant