The Middle East is brisk with business these days flocked by gold hunters from around the world, including Russia, who are coming here after gold bullions and coins, which are selling like hot cakes pushing gold statistics upwards. According to Business Intelligence – Middle East, there is an acute shortage of gold coins at the annual Dubai Shopping Festival taking place this year from 15 January to 15 February. “Many gold and jewellery shops in Dubai do not have the stocks of gold coins,” said a manager with Joy Alukkas, a leading Dubai jeweller. He said the main reason for the short supply of gold coins is primarily due to their heavy demand in Dubai, the main regional source for gold in Middle East. “All the jewelers offer special discounts and special offers for gold buying and thus there is a spurt in gold purchases. So there is a shortage of gold coins here,” the manager added.
Gold jewellers are offering heavy discounts on purchases at the Festival. For instance, Damas stores, the leading international jewellery retailer in the Middle East, have offered free gold coins with every purchase of gold and jewellery worth AED500. “This mega promotion offered during the biggest regional shopping bonanza will give five shoppers the chance to win 100gm of gold every day and four lucky winners will also get an opportunity to win the grand prize of 1kg gold each,” said a statement from Damas. Tawhid Abdullah, Managing Director of Damas, said: "During DSF, we witness at least 40% increase in retail activities across our outlets. Damas as a support sponsor of DSF has once again entered in this annual event with the commitment to support the initiatives of Dubai Government to promote tourism in the city.” The financial crisis may have taken its toll but the impact on the UAE's tourism industry was expected to be limited thanks to a continuing stream of visitors from Russia, India and Southeast Asia.
A report published by Deloitte, the business advisory firm, highlights continued, albeit cautious, optimism for private equity (PE) activity in the MENA region for 2009, says BI-ME in another article. The report summarizes the results of a survey carried out for Deloitte by Arbor Square Associates who interviewed senior executives of PE firms operating in the region. Some 60% of respondents said that they expect PE investment activity to increase or at least maintain existing levels in the next 12 months, with consumer, power, and healthcare expected to be the most active sectors.
Chris Ward, CEO Financial Advisory Services, Deloitte Middle East, comments: “Irrespective of global challenges, MENA continues to attract investors. In fact, 75% of respondents expect an increase in investor appetite for MENA funds as a result of the continued underlying economic growth of the region, the significant financial resources here and, as yet, the wealth of untapped opportunities in the region. This does not mean that investors are being reckless, however, thorough due diligence will once again come to the fore and we are certainly going to see a return to traditional hands-on portfolio management.” In the survey Deloitte spoke with 30 global private equity houses, with an estimated total of US$46.5 billion assets under management.
BI-ME staff also posted an analysis, saying gold proved its metal in 2008, providing a safe haven for investors in record volume and outperforming many other assets in relative price and volatility terms. Despite one of the most tumultuous years in financial markets since the Great Depression, gold ended the year on a firm footing recording its eighth consecutive annual increase. Figures from the latest World Gold Council report show that the last three months of 2008 were a quarter of two halves. While distressed gold sales by some institutional investors meeting margin calls on other assets had a dampening effect on price in the first few weeks of the final quarter, by mid November the relative stabilization in financial conditions, fears about the future inflationary impact of shifts in monetary policy and the dollar resuming its secular decline led gold to rally by around US$150 per ounce. Gold, therefore, closed the year at US$869.75 per ounce on the London PM fix, up 4% from the same period in 2007. The average gold price rose by US$175.33 per ounce to US$871.85.
Gold’s performance is impressive considering the massive wealth destruction that took place elsewhere in financial and commodities markets. Global equities and many commodities lost around half their value last year. Gold’s price performance is especially impressive when juxtaposed against other commodities. Of the 17 commodities monitored by the World Gold Council, gold was the only one to increase in price last year. The sharpest declines were posted in lead, nickel, copper and oil, which fell by 63%, 58%, 57% and 56% respectively. Each of the other precious metals also fell sharply (silver by 27%, palladium 49% and platinum 39%). The series of high profile bank failures that followed made investors increasingly mistrustful of financial institutions. They turned to gold, buying record levels of gold ETFs and so many coins and small bars that severe global shortages emerged. Gold’s lack of counterparty risk was a key motivation.
The latest World Gold Council available data on coin and bar sales is for Q3 2008 (comprehensive Q4 data will be released in mid-February). Retail demand for gold was extremely strong during the third quarter, rising by 127 tons, from 105.1 tons in Q3 2007 to 232.1 tons in Q3 2008, an increase of 121%. The drivers behind the increase included the US (up 20.3 tons), India (18.7 tons), Switzerland (17.5 tons) and Germany (16.0 tons), although numerous other countries also reported heavy demand. Severe stock shortages of bars and coins were reported among bullion dealers in many parts of the world. Anecdotal evidence suggests that retail demand for coins and bars remained strong in Q4, although some dealers reported a moderation in demand towards the end of the quarter. Availability remained an issue in Q4, with dealers still not being able to get all the coins they would have liked, suggesting that re-stocking will provide a healthy source of retail investment demand in Q1 2009.
