Arab Spring brings gold-buying rush to a halt

Expats from countries where the economy was damaged by the Arab Spring cut back on gold purchases to send cash back home.

For most of last year, the consistent climb in the price of gold attracted speculators in search of an economic haven. Sarah Dea / The National

Mohamed Nader Al Chaar, the owner of Samer Jewellery in Abu Dhabi's Gold Souq, relies on customers from Egypt, Syria and Tunisia, most of whom purchase gold as an investment or as dowries.

But over the past two months business has fallen off as those expatriates have had to send increasing amounts of money back home as unrest has wreaked havoc on their economies.

"All my clients are Arab [expatriates]," Mr Al Chaar said. "Whether they are Egyptian, Syrian or Tunisian, they are all prioritising sending money to their families back home, rather than buying gold jewellery or bars from my shop."

Sales at Samer Jewellery, run by Mr Al Chaar and his sons, are down by 25 per cent for this month and last month compared with the same period last year, he said.

Oil-importing economies are expected to show weaker growth this year than previously anticipated, at just 3 per cent, from an earlier forecast of 4.5 per cent by the IMF.

Currency devaluations have caused a surge in inflation for countries that were already facing double-digit figures.

In Syria, the pound has shed about 50 per cent of its official value since protests began last March. The US dollar is now worth 57.3 pounds compared with 47 pounds before the unrest began. But the black market puts the dollar at 71 pounds.

Mr Al Chaar said the unrest in Syria had caused a radical shift in the way Syrians spend their money.

"One gram of gold is now worth 3,000 Syrian pounds [Dh188] at home. That is equivalent to a person's entire month's salary," said the Syrian business owner.

"Gone are the days of last year when we were struggling to keep up with the rising demand for gold bars, when customers would pass by my shop to purchase dowries for their families in Syria or just for investment purposes. The economic situation in those countries today is worrisome."

For most of last year, the consistent climb in the price of gold attracted speculators in search of an economic haven.

"A herd mentality was behind the purchases last year. One person would tell the other about the rise in price and more people would follow suit," Mr Al Chaar said. "This year, the mood seems to be more sober as the seriousness in the slowdown of those economies weighs on Arabs' minds."

Gold rose 2 per cent last week on the Comex in New York, to settle at US$1,776.40 an ounce, bringing the yearly gain to 13 per cent.

Other merchants agreed that the frenzy had ended, at least for now.

"The gold rush is over. There is a huge decline in activity," said Riyad Musbah, the owner of Riyad Jewellery at the souq. "Right to the end of last year, we would have at least five to six customers a day inquiring about the gold bars. Now every two to three days, one person may be looking to buy."

Ebad Mohamed, the owner of Al Awadhi Jewellery, said that while sales to Arab expatriates had declined by almost 30 per cent, sales to Emiratis had remained stable.

"The Arab expatriate community is more vulnerable to geopolitical issues," Mr Mohamed said. "Business is not like before. Whereas Emiratis will sell when gold hits a peak and perhaps buy some more, and when the price falls you will also see them buying."

Remittances to the Arab Spring countries have increased significantly from the Gulf countries, said Ashwin Shetty, the head of global treasury operations at UAE Exchange in Abu Dhabi.

"The depreciation in currencies of those countries has caused a surge in remittances," Mr Shetty said "Volumes have increased by 15 per cent on average this year."

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