The historic Dubai marketplace that calls itself the City of Gold is glittering less these days.
Under streets and alleys covered by roofs to protect window shoppers from the intense desert sun, more than 300 stores peddle everything from ingots to Bedouin jewelry. The Dubai Gold Souk had become one of the largest such marketplaces, offering tax-free precious metal, as Persian Gulf oil wealth ballooned in the past few decades.
Now, with the plunge in crude throttling economies across the Middle East, gold buyers are harder to find. Demand for the metal is slowing in the region and Dubai has seen a drop-off in some visitors. Shopkeepers say sales are declining because tourists from Saudi Arabia and Russia have less cash to spend. Sellers offer discounts for gold that two years ago fetched a premium.
“The market is dead,” Jeffrey Rhodes, who has spent 27 years in Dubai’s gold industry and founded Rhodes Precious Metals Consultancy DMCC, said by telephone on April 21. “There’s no real demand here.”
The city’s history in gold jewelry dates back to the Bedouin nomads that roamed the Arabian desert, and it has long been a center for trading the metal. Dubai is the second biggest of the United Arab Emirates and is situated on the Arabian Peninsula near the shipping routes out of the Gulf. It’s a bridge between Africa, home to some of the world’s richest mines, and the jewelry markets of India, whose citizens buy more gold than anyone else on the planet.
Even with fewer shoppers in the market, which rose to prominence in the 1940s and is spaced across two buildings as high as six floors, Dubai is still a major trading hub. The weight of all the gold jewelry on display comes to about 25 metric tons, the same as five Indian elephants, according to an association representing the vendors.
Lower oil prices and political turmoil across the Middle East and Russia are hurting tourism to Dubai. With Brent crude futures down 43 percent from a peak in June, oil revenue is slumping for the world’s largest producers. Russia is heading toward a recession and its currency has plunged, while Saudi Arabia is on track for the slowest economic growth since 2009.
Shopping trips from the Middle East “are fewer and shorter, and they spend less,” Gerhard Schubert, founder of Schubert Commodities Consultancy DMCC and a member of the Dubai Multi Commodities Centre’s responsible sourcing committee, said by telephone from Dubai on April 28. “This will be even worse after Ramadan, during the Eid holiday when you normally have a million Saudis coming over. I’m sure the numbers will be down this year.”