“Safe Haven Buying” Boosts Gold Demand in Middle East

We’ve focused a great deal on gold demand in China, India, and Eastern Bloc countries over the last several months, but people in these nations aren’t the only ones buying gold. Demand for the yellow metal is also robust in the Middle East due to what analysts call “safe haven buying.”

Despite general sluggishness in the retail sector, gold jewelry sales surged in the United Arab Emirates during January. According to Gulf News, retailers in Dubai sold upwards of 8 tons of gold jewelry last month. This rivals sales rates from January 2015, despite a much more difficult environment for retailers this year. Abdul Salam K.P., a member of the board at Dubai Gold & Jewellery Group, pointed to gold sales as one of the few bright spots for UAE retailers:

There seem to be a lot of ‘gold as safe haven’ buying taking place right now. To retain the January 2015 volumes is in itself a victory of sorts for the jewelry trade. There’s been a shake-up of consumer confidence by what’s been happening in the economy, and retail sector in particular has been deeply impacted. In this context, gold purchases seem to one of the few silver linings the retail sector has been seeing. With these sentiments driving the purchasing, shoppers were willing to overlook the fact that gold prices had actually inched up since January 1.”

Analysts say about 70% of the purchasers were resident shoppers, with visitors making up the balance of the sales.

Salam said, “January’s sales tally for the local gold trade need not be an exception,” and indicated he expects continued buying support in the upcoming months.

Demand for gold in India continues to be robust. According to the Economic Times, Indian gold imports more than doubled in December, hitting $3.8 billion. The country’s jewelry and investment demand increased 6% to 890 tons in the fourth quarter of 2015. In 2014-2015, gold ranked as the third-largest commodity imported into India, behind only oil and electronics.

February may well be a big month for gold sales in China. The Chinese New Year falls on Feb. 8, and it is typically a gold-buying season. As Gulf News put it, “If Chinese shoppers started doing the same [as shoppers in the UAE] with their New Year coming up next week, the gold run may have just started.”

Globally, gold demand increased by 2% in Q4 2015, even as supplies fell 7%.

Salam emphasized that a desire for a “safe haven” was a strong motivator behind the gold buying spree. Gold has historically proven an effective means of preserving wealth during bad economic times. Retail woes in the UAE signal a downturn in its economy, and people are turning to gold.

Meanwhile, there are similar signs of trouble in the US. Retail sales fell 0.1% in December. The New York Times called it a sign of a “fragile economy.”

Peter Schiff has been saying the US may already be in a recession, and last week the mainstream media even began sounding warning sirens. It may well be time for Americans to follow the example of people in Asia and the Middles East, and buy gold as a safe haven.

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