Riyadh, Asharq Al-Awsat—The gold market in Saudi Arabia continues to realize modest results in 2013, a time in which gold investors had expected the individual rate of sales to rise. This comes following a period of reluctance which lasted more than three years due to the high price of gold per gram. Traders in the market have said that the rate of decline since the New Year has reached 5 percent.
This dilemma has forced factories to change the moulds of their gold products in order to attract customers, having largely adopted styles which seem dense and heavy but are in actuality hollow. However this tactic does not seem to have succeeded in generating significant purchases. Traders in the gold market explain that the current prices impede consumer demand and raise buyer reluctance, indicating that these prices have reached unreasonable levels and have become largely unpredictable.
Said Backerman, a gold market trader, stressed that he is depending on 2013 to rectify the crisis in sales. He said, "What is surprising is that there has been a further decrease in demand by about 5 percent over the first months of 2013. This coincides with a surge in prices which is making customers think twice before deciding to buy gold. The fluctuations in gold prices have a negative impact on final sales. Gold is also considered the safest investment in global markets, and in these uneasy economic times, the demand for gold in global markets is strong and compounds the already high prices.”
Last year traders wagered that the gold market would experience a corrective decline in 2013 based on 2012’s unusually high prices and data on supply and demand. However key indicators have shown that prices are remaining high and are going to hover at current levels or even increase.
Gold trader Fayez Al-Saqaf said, “Gold traders are not experiencing losses, but there is a decrease in profits, and if weak sales continue there will be negative long-term impacts.” He pointed out that gold prices are determined by global markets, which makes the issue more complicated for Saudi traders.
As for the current price of gold, Mr. Saqaf said that a 10-karat ounce of gold currently fetches $2,263 dollars, 14-karat of the same weight costs $3,161, 18-karat $4,006, 21-karat $4,733, 22-karat $4,958, and 24-karat $5,407. These figures indicate that prices continue to rise, contrary to some global markets. In most markets gold is considered a safe investment option because it is traded globally and functions as a sort of global economic short-hand.
The price of gold has fluctuated over the past two years, but its overall value has increased due to the recent crises and recessions in the global economy. This pattern is similar to that of the price of oil, which is projected to continue to increase during the coming year. Moreover uncertainty in the Eurozone has added to the demand for gold, with many investors considering it a safe option to weather the economic storms which are battering some of the world's economies at the moment.
Rashid Al Dosari, who owns of a number of gold shops, says that the way Saudis purchase gold has changed, saying, “Conspicuously heavy gold jewelry was in high demand, but this style has been replaced by orders for smaller pieces of jewelry that seem heavy but are actually hollow, or that contain small apertures which decrease overall weight.” He pointed out that factories responded quickly to this shift in demand and have been producing styles to match the new trend.
Mr. Dosari went on to say, “Most purchases are gifts for women, such as wedding bands. But these have decreased as of late because of the increase in price.”
It is noteworthy that Saudi Arabia is fourth in the world in gold purchases, and first in the Arab world, accounting for approximately a third of total demand for gold in the Middle East. The country’s economic and political stability have been instrumental in allowing it to become a global leader in the gold industry.