Saudi retail gold sales plunge

Higher prices and fewer visitors force sales down 30%

DUBAI - 

(Reuters) - The volume of gold jewellery sales in Saudi Arabia has fallen as much as 30% in the first six months of the year, as the economic crisis and high gold prices deter buyers, gold retailers said on Wednesday.

Gold has risen around 39% to trade at over $945 an ounce from a low near $680 in October as investors buy the metal as a safe haven in a time of economic uncertainty.

"Gold prices are just too high at the moment and people cannot afford these prices, even when we offer discounts on designs, that's why sales this year are down 30%," said Salam Omar Bin Salman, deputy manager of Bin Salman Gold Jewellery, a medium sized gold retailer in the kingdom.

"The economic crisis is also making people think twice before they spend," he added.

The pace of Saudi consumption was unlikely to improve unless the price falls, retailers said.

"I think that demand for gold will begin to pick up again once prices decrease," said Salman. "I think this will happen by mid-2010, until then we just have to pray things don't get worse."

A slower summer season with less visitors than last year has also contributed to the drop in sales in the Arab world's largest economy, said a Jeddah-based salesman from Al Rumaizan Gold & Jewellery, one of the largest gold retailers in Saudi.

"This month our sales have been down by 10% compared to last year as a result of less Arab and Indian tourists coming in," he said, adding that 30 percent of the company's sales rely on visitors.

Demand for gold in the Middle East fell 26% year-on-year during the first quarter, the World Gold Council said in its quarterly report in May. [ID:nLK522628]

Jewellery demand makes up much more of the market in the Middle East than investment demand, so the region's gold sellers have felt the benefit of investor interest less than elsewhere.

Gold sales in the neighbouring United Arab Emirates have seen a similar decline.

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