Dijllah Jewellery FZCO, which sells jewelry and gold bars wholesale, has seen sales decline 40 percent this year, according to Managing Director Mohammed Hammoodi Hashim. Rimas 1 Jewellery, with customers in the Middle East and North Africa, put the decline at 15 percent for the first quarter, according to Walid Al Sudi, a partner at the firm and whose family has been in the gold business for at least five generations.
Middle Eastern demand for the metal fell 23 percent in 2014, the biggest drop in at least four years, data from Metals Focus, a London-based research firm, show. Russian visitors to Dubai fell 36 percent in February, according to a March report from The National newspaper that cited airport statistics.
Everyone Worried
“We are still surviving, but everyone is worried about the future,” Hashim said. He said a kilogram bar of gold in Dubai this month costs 20 cents an ounce below the London spot price, a sign of weak demand for the metal, compared with a premium of $1.50 in 2013. An ounce of gold fetched $1,198.82 in London on Thursday.
The decline in Dubai’s gold market is temporary, according to Mohammed Alashrafi, who runs five stores in the souk as an owner of Sama Al Khaleej Gold & Jewellery Trading LLC. He’s in the process of opening another store for customers from the Persian Gulf.
“Things are going to pick up again,” Alashrafi said. “The market in the region goes quiet from time to time, but it will never die.”
Other parts of the industry are expanding. Kaloti Precious Metals, a gold refiner, plans to open a plant in Dubai later this year that can process 1,400 tons of the metal annually.
The lack of interest in gold extends beyond the physical market. Trading in bullion futures on the city’s metals exchange is at the lowest in 19 months, with contracts changing hands an average of 1,136 times over the past 15 days.
For now, most shopkeepers in the gold souk are planning to ride out the slowdown, according to Chandu Siroya, vice chairman of the Dubai Gold and Jewellery Group. Sales at his store fell at least 10 percent in the first quarter, he said.
“We’re being hit by a combination of lower oil prices and lower tourism,” Siroya said by telephone from Dubai on April 28. “This year is going to be tough.”