Iranians shop for gold in Tehran. Demand for the precious metal rose 40 per cent in the third quarter. Newsha Tavakolian For The National
Iranians shop for gold in Tehran. Demand for the precious metal rose 40 per cent in the third quarter. Newsha Tavakolian For The National
Iranians shop for gold in Tehran. Demand for the precious metal rose 40 per cent in the third quarter. Newsha Tavakolian For The National
Iranians shop for gold in Tehran. Demand for the precious metal rose 40 per cent in the third quarter. Newsha Tavakolian For The National

Markets

Nuclear deal spurs gold rush in Iran

Demand for gold jewellery surged to a near two-year high in the third quarter as sentiment improved following Tehran’s signing of a nuclear deal with world powers.

John Everington

November 12, 2015

  • English
  • Arabic

Iranian demand for gold jewellery surged to a near two-year high in the third quarter as sentiment improved following Tehran’s signing of a nuclear deal with world powers in July.

The surge in Iranian demand for the precious metal came amid falling demand in other parts of the Middle East as oil prices slumped.

Global demand for gold in the third quarter rose 8 per cent year on year to 1,120.9 tonnes, its highest level in two years, according to figures released on Thursday by the World Gold Council.

Consumer demand for gold grew following a price dip prompted by exchange-traded fund outflows in July, with prices rebounding as institutional investors resumed purchases.

Bullion for immediate delivery edged up 0.1 per cent to US$1,087.40 an ounce in Singapore yesterday, according to Bloomberg, just above the $1,077.40 an ounce level on July 24, the lowest since 2010.

Demand for gold jewellery in Iran jumped 40 per cent to 12.8 tonnes in the three months to the end of September, making it one of the fastest-growing jewellery markets in the world, according to the council.

“Consumer sentiment was boosted by the signing of the nuclear deal, an affect that was further magnified by the tumbling gold price,” the council noted, despite the introduction of a 9 per cent value-added tax in Iran in late March.

Gold jewellery demand across the Middle East grew 8 per cent year on year to 55.5 tonnes, even as demand fell sharply in some parts of the region after lower oil prices.

Demand in Kuwait fell 15 per cent year on year to 2.2 tonnes in the third quarter. UAE demand dropped 5 per cent to 9.9 tonnes in the quarter.

However, the UAE’s Central Bank confirmed that it added five tonnes of gold to its reserves between April and September, placing the UAE among the top 100 holders of gold worldwide.

Gold purchases by central banks rose to 175 tonnes during the quarter, just shy of the record level of 179.5 tonnes in the third quarter last year.

jeverington@thenational.ae

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The flights

Flydubai flies to Podgorica or nearby Tivat via Sarajevo from Dh2,155 return including taxes. Turkish Airlines flies from Abu Dhabi and Dubai to Podgorica via Istanbul; alternatively, fly with Flydubai from Dubai to Belgrade and take a short flight with Montenegro Air to Podgorica. Etihad flies from Abu Dhabi to Podgorica via Belgrade. Flights cost from about Dh3,000 return including taxes. There are buses from Podgorica to Plav. 

The tour

While you can apply for a permit for the route yourself, it’s best to travel with an agency that will arrange it for you. These include Zbulo in Albania (www.zbulo.org) or Zalaz in Montenegro (www.zalaz.me).

 

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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

While you're here
The biog

Hobbies: Salsa dancing “It's in my blood” and listening to music in different languages

Favourite place to travel to: “Thailand, as it's gorgeous, food is delicious, their massages are to die for!”  

Favourite food: “I'm a vegetarian, so I can't get enough of salad.”

Favourite film:  “I love watching documentaries, and am fascinated by nature, animals, human anatomy. I love watching to learn!”

Best spot in the UAE: “I fell in love with Fujairah and anywhere outside the big cities, where I can get some peace and get a break from the busy lifestyle”

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