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Wed 2 Jun 2010 10:54 PM

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UAE gold sales steady in May due to high prices

Gold prices too high for any recovery of demand to take place, retailers said.

UAE gold sales steady in May due to high prices
STAGNANT SALES: Retail gold sales in Abu Dhabi and Dubai remained stagnant during May compared to the same time last year, due to high prices. (Getty Images)

Retail gold sales in Abu Dhabi and Dubai remained stagnant during May compared with the same time last year, as high prices for the metal discouraged consumers, retailers told Reuters on Wednesday.

Tushar Patni, director of Ajanta Jewellers, one of the largest retailers in the emirate capital of Abu Dhabi, said: "The gold price is just too high for any recovery of demand to take place and in May we didn't see much change from last year."

Spot gold prices reached around $1,220.95 on Wednesday, close to the record high of $1,248.95 hit in mid-May when worries about euro zone debt encouraged investment in gold, seen as a safe-haven asset.

A salesman at Modern Jewellery in Dubai's old gold souk said: "Sales were weak in May because the gold price is just too high. We are offering discounts but still the response in the market is not that good as tourists don't come to Dubai during these hot months."

This year's Indian Akshaya Tritiya festival gave sales a one day lift on May 17.

On that day sales in Gulf markets were 11 percent higher than last year, according to the World Gold Council (WGC). More than 720 kg of gold worth around $30 million was sold in the Gulf region during the one day festival.

Patni said: "But this was just one day and it didn't really manage to make up for the sales for the rest of the month," adding that the most active buyers in recent months were from India.

Analysts expect gold prices to remain strong until the end of the year due to the euro zone crisis.

Central banks world wide have also been looking to limit their exposure to the crisis by boosting gold reserves.

Iran's central bank said on Wednesday that it had plans to sell 45 billion euros from its reserves to buy dollars and gold ingots.

Pradeep Unni, senior analyst and trader at Richcomm Global Services in Dubai, said: "The market didn't show much of a reaction to the Iran central bank news."

He added: "But the general sentiment is that gold prices might rise even further during the course of the year which would put more pressure on the retail demand." (Reuters)

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