Saturday, September 3, 2011

Booming gold demand in Abu Dhabi

Jewellers in the United Arab Emirates are experiencing difficulties meeting rapidly growing demand for gold bullion. The strong rise in gold prices over recent months did not detract from domestic investors´ willingness to transfer capital into precious metals. On the contrary, locally operating gold traders reported that Abu Dhabi´s demand for 100 gram gold bars has reached new highs. Capital flight into safe havens continues among wealthy and middle-class investors, who fear that the world’s economy may face a double dip recession.

The monetary character of gold and silver makes both precious metals an interesting investment alternative. Paradigms have shifted since the outbreak of the worldwide financial crisis. Wealth preservation, rather than high returns, is now the main goal of investors. Precious metals have seen many different economic systems come and go in the last 5,000 years, while proving to be excellent safe havens. In times of fiat currency debasement and central bank money printing, investors are turning once more to precious metals.

Abu Dhabi´s jewellers have already adapted their business model to new market conditions. Sharply rising gold prices have led to a decline in jewellery demand in the United Arab Emirates, so many local jewellers have started offering gold bars to their clients. At Al Awadhi Jewellery, one of the largest jewellers in Abu Dhabi´s gold Souk, about 30 customers a day ask for gold bars, from 100-gram to 1-kilogram. The prices for these gold products vary between 22,000 dirham (about $6,000) per 100 grams and 220,000 dirham (about $60,000 per kilogram). According to Al Awadhi´s management, the demand for gold bars of these sizes has increased by 60 per cent in the last two months. Demand comes primarily from wealthy and middle-class investors seeking for safe investment alternatives.

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