Gold jewellery demand in Kuwait grows on high oil
Saturday, March 11, 2006 - Kuwait Times News (www.kuwaittimes.net)
KUWAIT: The regional office of World Gold Council in Dubai announced in its latest report on regional and international gold demand for 2005. Worldwide, the demand has increased on gold Jewellery by 5% in 2005 compared to 2004 to reach 2736 tonnes; likewise, the demand on gold for industrial use has also increased by 2% to reach 419 tonnes; as for the demand on gold for investment, it has reached 600 tonnes with an increase of 26% for 2005.
According to the figures compiled by Gold Fields Mineral Services Ltd for the World Gold Council in London for quarter four as well as the whole year of 2005, remarkable demand increase have been noted for the investment sector which reached approximately 200 tonnes in the last quarter of 2005. On the other hand, the gold retail market has been effected negatively in quarter four due to the upward surge in the world gold price that resulted from the investment inflows and the trend was to sell gold for profit taking; however, In spite of this the demand in forth quarter was strong enough to have absorb the extra 10% increase in supply and the 12% increase in the price.
In Kuwait, which comes third major gold market in the GCC Countries after Saudi Arabia and UAE, the demand on gold jewellery have increased by 6.5% in 2005 compared to 2004. As for the gold retail investment sector the demand decreased by 3.5% compared to the same period last year 2004, although the investment demand increased 10% in the last quarter of 2005 compared to the third quarter of the same year. In conclusion, total gold demand for the whole year 2005 in Kuwait reached 25 tonnes.
However, despite these encouraging results of the Kuwaiti gold jewellery market, the local gold Jewellery manufacturing sector faced negative effects as a reduction of 6.3% took place in the forth quarter of 2005 (compared to the same period in 2004) where the gold Jewellery imports had covered the growing gold demand. The total reduction in gold jewellery manufacturing in the Kuwaiti market for the whole year of 2005 reached 1.6%, whereas local gold manufacturing increased in all other gulf countries.
This increase in gold demand is due to high oil prices and strong economy which led to stronger consumer spending and liquidity flow, which mainly has been put in the local and GCC stock markets and real estate. In addition to that, there has been an apparent effect of the expansion and development of several gold jewellery companies in the Kuwaiti market. Moreover, it is expected that the demand on gold will continue to rise in the current year 2006 in view of the stability of the State of Kuwait and the rise of world oil prices; in addition to the increase of the marketing and expanding activities by large scale gold jewellery companies in Kuwait along with the World Gold Council promotional activities in the region.
As for the other neighbouring Gulf States (including Turkey & Egypt), the increase in demand prevailed as well but in different levels. In Saudi Arabia the increase on gold jewellery demand was on top and reached 12% increase in 2005 compared to 2004 and total increase reached 13% in both gold jewellery and gold retail investment sectors. In UAE, the total percentage of gold demand in 2005 raised by 8%. As for the other Gulf States (Bahrain, Qatar & Oman) the total increase on gold demand reached 2.2%, 3.5% and 4.9% respectively. This increase is also due to high oil prices and strong economy conditions in those countries as well as tourism - specially in UAE; in addition to the increase of marketing activities which were put forward by gold jewellers and the World Gold Council, such as Kuwait Big Gold Shopping Festival in 2005 and Ramadan Gold Festival in Kuwait 2005, Dubai Shopping Festival, Dubai Summer Surprises, gold festivals and exhibitions in Kuwait and Bahrain - all in cooperation with several official sectors, such as the Ministry of Commerce & Industry in Kuwait, the Tourism Sector in the Ministry of Information in Kuwait, Dubai Government, Gold & Jewellery Committee in Dubai, Dubai Metals and Commodities Centre, etc. Likewise, the growth remained on the rise in Turkey (for the third constant year) and in Egypt to reach an extra 7% in Turkey and 4% in Egypt.
Commenting on 2005 positive demand results, Moaz Barakat, Managing Director of the World Gold Council in the Middle East, Turkey and Pakistan said: "The gold markets in the region are getting used to the price of $500 per ounce, which is due to the confidence of consumers in gold, whether it is for investment and saving or for gold jewellery in modern life. In addition to that, this has been due to the promotional campaigns launched by many gold jewellers -whether separately or in cooperation with the World Gold Council and several official and non-official entities in the region, along with the preparations of several marketing plans in 2006 to support this growing demand trend".
Barakat added: "In addition to the high world oil prices and the flow of liquidity; a weak dollar and an uncertain geopolitical situation in the Middle East have added to the glitter of gold and made it a major investment beneficiary besides local stock exchange markets and real state.
On the international level, the demand on gold has also increased in India - the largest gold consumer market in the world - to reach 17% in terms of weight in 2005 (equivalent to 25% increase in terms of dollar value); likewise in China - which has started liberating the gold markets since 2004 - to reach 20% in the retail investment sector and 8% in gold Jewellery sector. On the other hand, there was an exception in Europe where gold demand growth was negative for many economic reasons: in Italy the demand decreased by 7% in 2005 compared to 2004 as the Italian economy has been not performing well and consumer confidence has been facing economic and political uncertainties, which have been worsened by the spring political elections in 2006. Likewise, the demand had also decreased in the United Kingdom due to the uncertainty of consumer spending in face of concern over possibly rising interest rates, higher taxes and price increases of a number of essentials. However, the performance of high carat gold jewellery was better as it was considered more fashionable, especially modern and fashionable gold jewellery designs have been introduced and launched over the last five years.
As for the United States - which holds the second largest gold demand market in the world - the demand increased in 2005 for the first time since 2001 despite high energy prices and the suffering from two large hurricanes in the forth quarter of 2005. Gold jewellery demand increased by 5% while it reached as 72% increase in gold Investment sector. Moreover, market research carried out towards the end of 2005 showed positive shifts towards gold jewellery and in future purchasing intent.
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